SEC Enforcement Efforts Increase, Cost of Settlement Still High

Lora Bentley

It's no secret the Securities and Exchange Commission is ramping up its enforcement efforts. Different agency officials have made the announcement publicly. But that doesn't mean that the cost of settling charges brought by the agency is decreasing by much, if at all. Nor does it mean that the agency's settlement practices are changing much.


For instance, Compliance Week's Melissa Aguilar pointed out Monday:

Post-Sarbanes-Oxley, the highest median company settlement was $1.5 million in both 2005 and 2006, according to NERA Economic Consulting's 2008 settlement data. Last year's median company settlement was $1.3 million.

Though there has been a decrease in the cost of individual settlements, Aguilar also notes the average settlement in the first half of 2009 ($10.1 million) represents an increase over the full year average last year of $8.4 million.


Also of interest, according to Wall Street Journal columnist Suzanne Barlyn, is the way the SEC has been handling the announcement of charges and settlement of those charges on the same day. Tuesday, she wrote:

The Securities and Exchange Commission's agreement with Hank Greenberg marks the second time in a week the agency has announced, simultaneously, charges and a settlement in a serious matter involving misled investors.


The first such simultaneous announcement involved Bank of America executives, who were accused of misleading investors, according to, in a joint proxy statement regarding end of year bonuses for Merrill Lynch employees. So far, though, the federal judge who must sign off on the settlement has refused to do so without gathering more information.


That lack of information is the very thing that critics of the SEC's "all-in-one" charges/settlement announcement practice have a problem with, WSJ's Barlyn says. She quotes former SEC chief accountant Lynn Turner this way: "When you have both charges and settlement together at the same time, you have too much negotiating behind closed doors and the public doesn't always see the whole picture."


At the same time, though, even critics agree that the current practice saves SEC resources, which are admittedly limited.

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