Penalties
The SEC has a wide range of penalties available to it for punishment of violations of the Securities Acts. The simplest penalty is a cease-and-desist order or a permanent injunction where the defendant is enjoined from future violations on penalty of contempt of court. For more egregious acts, wrongdoers can be prohibited from ever again serving as an officer or director of a registered company. Professionals, such as lawyers and accountants, who are found to violate the securities laws can be censured, suspended, or barred from practicing before the SEC. Such suspensions can be for a set time interval or permanent. Civil monetary penalties are also available. In addition, a defendant can be forced to disgorge any bonuses or incentive compensation amounts received that were calculated on the basis of what the commission deems to be inaccurate financial results. Finally, given the severity of the violation and the extent to which the commission perceives the existence of fraudulent intent, the case can be referred to the U.S. Department of Justice for criminal prosecution.
The America Online case noted above did not involve alleged fraudulent acts. It was resolved with a cease-and-desist order.59 In contrast, the FastComm case, which did involve alleged fraudulent acts, resulted in injunctions against future violations of securities laws and a civil monetary penalty of $20,000.60 In the KnowledgeWare case discussed in Chapter 2, Francis Tarkenton, the company’s former CEO and chairman of the board, was enjoined from future violations of the securities laws. In addition, he agreed to pay a civil monetary penalty of $100,000 and disgorged $54,187 plus interest in incentive compensation that was received on the basis of the company’s materially overstated earnings.61
In another case, Kevin Kearney, a certified public accountant and former manager of financial reporting at CUC International, Inc., a predecessor company of Cendant Corp., was denied the privilege of appearing or practicing before the commission as an accountant. After five years, Mr. Kearney may request that the commission consider his reinstatement.62
Taken From : The Financial Numbers Game
[...] that can hang over defendants for some time. In addition, other costs may accrue to players of the financial numbers game, beyond the potential civil and criminal penalties, that dwarf, in financial terms, the direct [...]
Posted on June 20th, 2009 at 6:43 am