Chicago partner James G. Lundy was a panelist for the StoneTurn Group’s conversation on “Trends and Hot Topics in SEC Enforcement” on Monday, November 7, 2016. Jim was joined by fellow alumni of the U.S. Securities and Exchange Commission, along with moderator Rex Homme of the StoneTurn Group.
The SEC continues to trend upward in its filing of enforcement cases, as 2016 marks the third year in a row the number of cases has increased; in fact, the agency recently announced that it had broken its own record for the number of enforcement cases brought. The panel discussion focused on this announcement, and what it means for attorneys, audit committee and board members, corporate executives and compliance professionals heading into the end of the year.
Panelists explored best practices for navigating this enforcement-heavy environment, and established five key considerations:
- In the absence of wide-scale accounting fraud, the SEC has been pursuing less serious “violations” cases. This has also increased the emphasis on internal controls and led to a greater number of settlements and cases, though with less in total collections.
- There are more specialists in the SEC than ever before, allowing the agency to become more coordinated internally, as well with other regulatory agencies. This increased organization is a factor in the higher enforcement statistics.
- A prosecutorial mindset is driving enforcement actions. The current SEC Division of Enforcement is pursuing charges more aggressively now than in the past, particularly in whistleblower-related matters.
- The role of the gatekeeper is more critical now. In an investigation, the SEC will often begin with gatekeepers including audit committee members, CEOs and CFOs, CAOs and independent auditors.
- Document, document, document. The more a company can demonstrate that it has considered the relevant issues, exercised reasonable judgment and has appropriately documented conclusions, the more difficult it will be for the agency to find reasons to challenge a company’s processes and policies.
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