Perhaps after getting its proposed $33 million settlement with Bank of America rejected by the Southern District of New York, in part, for not naming one single employee for allegedly making misstatements concerning the bank’s merger with Merrill Lynch, the Securities and Exchange Commission is taking notice and might begin to target individuals behind a company’s violations “with renewed vigor,” according to a new report from NERA Economic Consulting. Elaine Buckberg, a senior vice president at NERA and a co-author of the report stated in an article for CFO.com that the “SEC is taking very seriously the role of individuals [in allegations of wrongdoing] and is actively enforcing against individuals because ultimately the conduct is done by individuals.”
To give support that the SEC might be targeting corporate individuals, at the annual meeting of the American Institute of Certified Public Accountants, Jason Flemmons, associate chief accountant in the SEC’s Division of Enforcement essentially put accountants on notice when he urged all accountants “to take your gatekeeping responsibilities seriously and with utmost alacrity.” Flemmons further warned that every accounting individual, from “the accounting clerk of a public company to the CFO…each and every one of you plays a crucial role in maintaining a capital market system of the highest caliber and integrity.” Flemmons noted that due to the downturn in the economy and “integrity lapses,” there is an increased pressure in companies to meet earnings targets and has “undoubtedly ignited temptations for many companies to commit financial fraud.”
There is further evidence that the SEC is serious in going after individuals based on the reorganization of the agency by the new chairperson, Mary Schapiro. For instance, the SEC is getting more funding; Schapiro brought in a new director for the enforcement division and terminated the practice of having the staff “to get the commission’s approval for levying financial penalties against companies.” The purpose is to cut red tape in order to expedite the SEC staff’s negotiations with companies. As such, Buckberg predicts that the SEC will have a greater number of settlements in 2010.
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