4.12.2007 SEC Enforcement Director Linda Thomsen spoke at the Mutual Fund Directors Forum’s 7th Annual Policy Conference in Washington, D.C. Director Thomsen began her speech by noting that independent directors of mutual funds are the watchdogs tasked with providing an independent check on fund management. When directors encounter problems or violations at a mutual fund complex, they can play an important role in overseeing efficient and effective remediation at a pace and in a manner that the SEC could not hope to replicate, she said.
Director Thomsen discussed the factors her Division considers when deciding which part of an organization to bring an enforcement action against. When serious misconduct occurs at a registered entity, the SEC is often inclined to charge and sanction that entity. In one mutual fund case, the SEC decided that the underlying conduct was so serious that it should bring charges against individuals at the fund complex and not the entity because the entity cooperated. Director Thomsen read from the administrative order: "In doing so, the Commission explained that it did not sue PFTC [the entity] because of its swift, extensive and extraordinary cooperation in the Commission's investigation of the transactions that are the subject of the Commission's complaint. PFTC's cooperation consisted of prompt self-reporting, an independent internal investigation, sharing the results of that investigation with the government . . ., terminating and otherwise disciplining responsible wrongdoers, providing full restitution to its defrauded clients, paying for the attorneys' and consultants' fees of its defrauded clients, and implementing new controls designed to prevent the recurrence of fraudulent conduct." Other topics addressed included the directors, interaction with chief compliance officers, fund portfolio trading and insider trading.
Please click http://www.sec.gov/news/speech/2007/spch041207lct.htm to access a copy of the speech.