Selected Enforcement Actions
SEC claws back bonus of software executive. The SEC instituted settled administrative proceedings against a software company and two former executives for engaging in an accounting fraud in which time sheets were falsified to hit quarterly financial targets. The improper time-reporting practices enabled the company to achieve its quarterly revenue and margin targets by improperly accelerating and misstating virtually all of its professional services revenue during a four-year period as well as a substantial portion of its license revenue. The company agreed to pay US$1.75 million to settle the SEC’s charges, and the former executives agreed to settle the case as well. In a separate order, the SEC required the company’s CEO to reimburse the company $2.5 million in bonuses and stock profits that he received while the accounting fraud was occurring, even though he was not charged with misconduct. (9/24/2014) SEC press release.
Investment adviser settles expense allocation matter. The SEC instituted settled administrative proceedings against an investment advisory firm for breach of its fiduciary duty to two private equity funds by sharing expenses with a company in one fund’s portfolio and another company in the other fund’s portfolio in a way that improperly benefited one fund over the other. Without admitting or denying the allegations, the adviser agreed to pay $1.5 million in disgorgement, $358,112 in prejudgment interest, and a $450,000 civil penalty to settle this matter. (9/22/2014) In the Matter of Lincolnshire Management, Inc., SEC Release No. IA-3927.
Chief Economist discusses structured data. Mark J. Flannery, Chief Economist and Director of the SEC’s Division of Economic and Risk Analysis (DERA), discussed how the Commission collects and uses structured data. The agency uses financial data from a variety of sources in its economic analysis of rules, risk assessment and market supervision initiatives. It also relies on financial data to support enforcement actions and compliance programs. The most notable and frequently discussed data source is the disclosure in forms and filings required under the SEC’s reporting rules, but the SEC also uses structured data purchased from commercial sources, produced by self-regulatory organizations, or obtained as part of its examinations and investigations. (9/30/2014) Flannery speech.
Whistleblower awarded record payment. The SEC announced an expected award of over $30 million to a whistleblower who provided key original information that lead to a successful SEC enforcement action. It is the fourth award to a whistleblower living in a foreign country and demonstrates the international breadth of the whistleblower program. (9/22/2014) SEC press release.
Staff announcements. The SEC announced that James R. Burns, Deputy Director in the Division of Trading and Markets, will leave the agency in October. (9/18/2014) Jason S. Patil has joined the SEC as an Administrative Law Judge. (9/22/2014) The agency further announced that Liban James has been named the Director of the Atlanta Regional Office and Rhea Dignam has been named Senior Counsel to the Director of the Office of Compliance Inspections and Examinations. (9/23/2014)