SEC Chairman Jay Clayton for the first time laid out the bases for settling an enforcement action. They are interesting, but to a large extent reflect the bases for terminating an investigation set out in the SEC\u2019s Enforcement Division Enforcement Manual. By the way, the Enforcement Manual does not give any guidance for settling proposed actions. <\/p>\n
\u201cBad Boy\u201d Waiver<\/b><\/p>\n
Chairman Clayton also set a new policy for dealing with simultaneous offers of settlement and requests for waivers of the \u201cbad boy\u201d rules limiting the use of Regulations D (private placements) and A (public offers up to $50 million) and losing the status as a Well Known Season Issuer under the Securities Act. <\/p>\n
Standards for Settlement: Compared with the Enforcement Manual<\/b><\/p>\n
1.\tCost of litigation. The Enforcement Manual states this as the sufficiency and strength of the evidence gathered by the staff;
\n2.\tWillingness of SEC to litigate zealously. The Enforcement Manual states this as staff resources available to pursue the matter;
\n3.\tRemedying harm to investors\u2014e.g. return of money to injured investors. Enforcement Manual states this as harm to investors if an action is not commenced; and
\n4.\tA desire for certainty- i.e. put the matter behind it for the defendant\/respondent. The Enforcement manual reflects this by stating that it considers the seriousness of the violative conduct and the age of the underlying misconduct.<\/p>\n
Tying Settlement with a \u201cBad Boy\u201d Waiver<\/b><\/p>\n
Chairman Clayton went on to say that a request for a waiver of the \u201cbad boy\u201d disqualification may be made simultaneously with, and may be included in, the offer of settlement. The SEC is not obligated to accept both the settlement and the waiver. If the SEC staff rejects, in whole or in part, the waiver request, and the offer of settlement is accepted, in whole or in part, by the SEC , the defendant would have five (5) business days to notify the staff that it agrees to move forward with part of the settlement offer that was accepted or to withdraw its offer of settlement. If the defendant fails to advise the staff or advises that it rejects the proposal, the matter will move forward to litigation.<\/p>\n
Questions: Comments<\/b><\/p>\n
Please feel free to contact me, Morrie Simkin, phone 212 455 0476; email msimkin@secueritiesregslawyer.com with any questions or comments or to further discuss this blog.
\nJuly 2019<\/p>\n","protected":false},"excerpt":{"rendered":"
SEC Chairman Jay Clayton for the first time laid out the bases for settling an enforcement action. They are interesting, but to a large extent reflect the bases for terminating an investigation set out in the SEC\u2019s Enforcement Division Enforcement Manual. By the way, the Enforcement Manual does not give any guidance for settling proposed … Continue reading A First Time Statement of Standards How to Settle with the SEC and Waive the \u201cBad Boy\u201d issue Something New and Something Old; What You Might Not Know<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-169","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/posts\/169","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/comments?post=169"}],"version-history":[{"count":2,"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/posts\/169\/revisions"}],"predecessor-version":[{"id":171,"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/posts\/169\/revisions\/171"}],"wp:attachment":[{"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/media?parent=169"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/categories?post=169"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/securitiesregslawyer.com\/blog\/wp-json\/wp\/v2\/tags?post=169"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}