Updated Sunday, April 20, 2014 as of 4:19 AM ET
SEC Settlements Fall For Second Year
by: Matt Ackermann
Monday, December 7, 2009
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The number of Securities and Exchange Commission settlements fell for the second consecutive fiscal year, according to data released Monday. But, settlements could increase in 2010 and 2011.

In 2009, settlements overall declined 6.98% to 626 from a year earlier, according to NERA Economic Consulting's fiscal year-end SEC Settlements Trends report. The 2009 figures represent the lowest annual number of settling defendants since the Sarbanes-Oxley Act was implemented in 2002.

Elaine Buckberg, a senior vice president for NERA who co-authored the report, said that the decline in settlements could be a result of lower staffing at the SEC. She said the new administration will want to make its mark by going after large companies, including broker-dealers.

“There is new leadership in place at the SEC and a lot of turnover at lower levels,” Buckberg said. “I think we have to wait and see if this is because of lower staffing levels. The new leadership has already said that it will be vigorous and it is possible we could see an upturn next year.”

Buckberg said that one of the first things that Mary Schapiro did when she became head of the SEC was to eliminate the Penalty Pilot Program, which was enacted in 2007. This program forced the entire SEC to approve a pre-settlement with a public company. Buckberg said that this program delayed the settlement process and would often reduce the size of penalties. “By removing it, we could see bigger settlements with publicly traded companies,” Buckberg said.

According to the NERA report, monetary payments were a component of 58.6% of company settlements and 58.9% of individual settlements this year. For companies, the average settlement more than doubled to $10.7 million, compared to $4.7 million a year earlier. The median company settlement was $1 million, the same as in 2008.

This year, the SEC has settled three cases over $100 million: Siemens’ $350 million alleged Foreign Corrupt Practices Act settlement, UBS’s $200 million settlement for allegedly facilitating customer tax evasion, and the $177 million alleged FCPA violation settlement for Halliburton and its subsidiary KBR.

The largest settlements were not disproportionately aimed at broker-dealers, Buckberg said. Two of the three largest settlements were for violations of the Foreign Corrupt Practices Act. “There has been a big rise in settlements related to the Foreign Corrupt Practices Act and the dollar amounts associated with these settlements,” she said.

UBS has been facing pressure for the U.S. government this year to provide information about its U.S. clients. In February, UBS and the U.S. government entered into a deferred prosecution agreement in which the firm agreed to pay $780 million in fines and restitution as well as hand over the names of more than 300 clients involved in alleged evasion of U.S. taxes. Just a day later, the Internal Revenue Service sued the bank for information on 52,000 account holders. In August, UBS agreed to hand over information on 4,450 client accounts in order to settle the lawsuit brought by the U.S. over alleged tax evasion.


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