U.S. Securities and Exchange Commission
SEC
Agency overview
Formed	June 6, 1934
Jurisdiction	Federal government of the United States
Headquarters	Washington, D.C.
Employees	3,748 (2010)[1]
Agency executive	Mary Schapiro, Chairman
Website
Official Website

The U.S. Securities and Exchange Commission (frequently abbreviated SEC) is a federal agency^[2] which holds primary responsibility for enforcing the federal securities laws and regulating the securities industry, the nation's stock and options exchanges, and other electronic securities markets in the United States. In addition to the Securities Exchange Act of 1934 that created it, the SEC enforces the Securities Act of 1933, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Sarbanes–Oxley Act of 2002 and other statutes. The SEC was created by Section 4 of the Securities Exchange Act of 1934 (now codified as 15 U.S.C. § 78d and commonly referred to as the 1934 Act).

Overview[link]

The SEC was established by United States President Franklin D. Roosevelt in 1934 as an independent, quasi-judicial regulatory agency during the Great Depression that followed the Crash of 1929. The main reason for the creation of the SEC was to regulate the stock market and prevent corporate abuses relating to the offering and sale of securities and corporate reporting. The SEC was given the power to license and regulate stock exchanges, the companies whose securities traded on them, and the brokers and dealers who conducted the trading.

Currently, the SEC is responsible for administering seven major laws that govern the securities industry. They are: the Securities Act of 1933, the Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Sarbanes–Oxley Act of 2002 and most recently the Credit Rating Agency Reform Act of 2006.

The enforcement authority given by Congress allows the SEC to bring civil enforcement actions against individuals or companies alleged to have committed accounting fraud, provided false information, or engaged in insider trading or other violations of the securities law. The SEC also works with criminal law enforcement agencies to prosecute individuals and companies alike for offenses which include a criminal violation.

To achieve its mandate, the SEC enforces the statutory requirement that public companies submit quarterly and annual reports, as well as other periodic reports. In addition to annual financial reports, company executives must provide a narrative account, called the "management discussion and analysis" (MD&A), that outlines the previous year of operations and explains how the company fared in that time period. Management will usually also touch on the upcoming year, outlining future goals and approaches to new projects. In an attempt to level the playing field for all investors, the SEC maintains an online database called EDGAR (the Electronic Data Gathering, Analysis, and Retrieval system) online from which investors can access this and other information filed with the agency.

Quarterly and bi-annual reports from public companies are crucial for investors to make sound decisions when investing in the capital markets. Unlike banking, investment in the capital markets is not guaranteed by the federal government. The potential for big gains needs to be weighed against equally likely losses. Mandatory disclosure of financial and other information about the issuer and the security itself gives private individuals as well as large institutions the same basic facts about the public companies they invest in, thereby increasing public scrutiny while reducing insider trading and fraud.

The SEC makes reports available to the public via the EDGAR system. SEC also offers publications on investment-related topics for public education. The same online system also takes tips and complaints from investors to help the SEC track down violators of the securities laws. The SEC adheres to a strict policy that it never comments on the existence or status of an ongoing investigation.

History[link]

Prior to the enactment of the federal securities laws and the creation of the SEC, there existed so-called Blue Sky laws that were enacted and enforced at the state level and regulated the offering and sale of securities to protect the public from fraud. Though the specific provisions of these laws varied among states, they all required the registration of all securities offerings and sales, as well as of every U.S. stock broker and brokerage firm.^[3]

However, these Blue Sky laws were generally found to be ineffective. For example, the Investment Bankers Association told its members as early as 1915 that they could "ignore" Blue Sky laws by making securities offerings across state lines through the mail.^[4] After holding hearings on abuses on interstate frauds (commonly known as the Pecora Commission), Congress passed the Securities Act of 1933 (15 U.S.C. § 77a) which regulates interstate sales of securities (original issues) at the federal level. The subsequent Securities Exchange Act of 1934 (15 U.S.C. § 78d) regulates sales of securities in the secondary market. Section 4 of the 1934 Act created the U.S. Securities and Exchange Commission to enforce the federal securities laws. Both laws are considered part of Franklin D. Roosevelt's "New Deal" raft of legislation.

The Securities Act of 1933 is also known as the "Truth in Securities Act" or the "Federal Securities Act” or just the "1933 Act." Its goal is to increase public trust in the capital markets by requiring uniform disclosure of information about public securities offerings. The primary drafters of 1933 Act were Huston Thompson, a former Federal Trade Commission (FTC) chairman, and Walter Miller and Ollie Butler, two attorneys in the Commerce Department's Foreign Service Division, with input from Supreme Court Justice Louis Brandeis. For the first year of the law's enactment, the enforcement of the statute rested with the Federal Trade Commission, but this power was transferred to the SEC following its creation in 1934. (Interestingly, the first, rejected draft of the Securities Act written by Samuel Untermyer vested these powers in the U.S. Post Office, because Untermyer believed that only by vesting enforcement powers with the postal service could the constitutionality of the act be assured.^[4]) The law requires that issuing companies register distributions of securities with the SEC prior to interstate sales of these securities, so that investors may have access to basic financial information about issuing companies and risks involved in investing in the securities in question. Since 1994, most registration statements (and associated materials) filed with the SEC can be accessed via the SEC’s online system, EDGAR.^[5]

The Securities Exchange Act of 1934 is also known as "the Exchange Act" or "the 1934 Act". This act regulates secondary trading between individuals and companies which are often unrelated to the original issuers of securities. Entities under the SEC’s authority include securities exchanges with physical trading floors such as the New York Stock Exchange (NYSE), self-regulatory organizations (SROs) such as the National Association of Securities Dealers (NASD), the Municipal Securities Rulemaking Board (MSRB), online trading platforms such as The NASDAQ Stock Market (NASDAQ) and ATS, and any other persons (e.g., securities brokers) engaged in transactions for the accounts of others.^[6]

President Franklin D. Roosevelt appointed Joseph P. Kennedy, Sr., father of President John F. Kennedy, to serve as the first Chairman of the SEC, along with James M. Landis (one of the architects of the 1934 Act and other New Deal legislation) and Ferdinand Pecora (Chief Counsel to the United States Senate Committee on Banking and Currency during its investigation of Wall Street banking and stock brokerage practices). Other prominent SEC commissioners and chairmen include William O. Douglas (who went on to be a U.S. Supreme Court justice), Jerome Frank (one of the leaders of the legal realism movement) and William J. Casey (who would later head the Central Intelligence Agency under President Ronald Reagan).

As part of the continuing investigation in 1974–75, Watergate scandal prosecutors offered companies that had given illegal campaign contributions to Richard Nixon's re-election campaign lenient sentences if they came forward.^[7] Many companies complied, including Northrop Grumman, 3M, American Airlines and Braniff International Airways.^[7] By 1976, prosecutors had convicted 18 American corporations of contributing illegally to Nixon's campaign.^[7] The SEC, in a state of flux after its chairman was forced to resign his post,^[7] began to audit all the political activities of publicly traded companies. The SEC's subsequent investigation found that many American companies were making vast political contributions abroad.^[7]

Organizational structure[link]

U.S. Securities and Exchange Commission headquarters in Washington, D.C., near Union Station.

Commission members[link]

The SEC consists of five Commissioners appointed by the President of the United States with the advice and consent of the United States Senate. Their terms last five years and are staggered so that one Commissioner's term ends on June 5 of each year. To ensure that the SEC remains non-partisan, no more than three Commissioners may belong to the same political party. The President also designates one of the Commissioners as Chairman, the SEC's top executive. However, the President does not possess the power to fire the appointed commissioners, a provision that was made to ensure the independence of the SEC. This issue arose during the 2008 Presidential Election in connection with the ensuing Financial Crises.

Currently the SEC commissioners are:^[8]

Divisions[link]

Within the SEC, there are five divisions. Headquartered in Washington, D.C., the SEC has 11 regional offices throughout the United States.

The SEC's five main divisions are:^[10]

• Corporation Finance
• Trading and Markets
• Investment Management
• Enforcement
• Risk, Strategy, and Financial Innovation

Corporation Finance is the division that oversees the disclosure made by public companies as well as the registration of transactions, such as mergers, made by companies. The division is also responsible for operating EDGAR.

The Trading and Markets division oversees self-regulatory organizations such as FINRA and MSRB and all broker-dealer firms and investment houses. This division also interprets proposed changes to regulations and monitors operations of the industry. In practice, the SEC delegates most of its enforcement and rulemaking authority to FINRA. In fact, all trading firms not regulated by other SROs must register as a member of FINRA. Individuals trading securities must pass exams administered by FINRA to become registered representatives.^[11][12]

The Investment Management Division oversees investment companies including mutual funds and investment advisors. This division administers federal securities laws, in particular the Investment Company Act of 1940 and Investment Advisers Act of 1940. This Division's responsibilities include:^[13]

• assisting the Commission in interpreting laws and regulations for the public and SEC inspection and enforcement staff;
• responding to no-action requests and requests for exemptive relief;
• reviewing investment company and investment adviser filings;
• assisting the Commission in enforcement matters involving investment companies and advisers; and
• advising the Commission on adapting SEC rules to new circumstances.

The Enforcement Division works with the other three divisions, and other Commission offices, to investigate violations of the securities laws and regulations and to bring actions against alleged violators. The SEC generally conducts investigations in private. The SEC's staff may seek voluntary production of documents and testimony, or may seek a formal order of investigation from the SEC, which allows the staff to compel the production of documents and witness testimony. The SEC can bring a civil action in a U.S. District Court or an administrative proceeding which is heard by an independent administrative law judge (ALJ). The SEC does not have criminal authority, but may refer matters to state and federal prosecutors. The current director of the SEC's Enforcement Division is Robert Khuzami, a former federal prosecutor.

Among the SEC's offices are:

• The Office of General Counsel, which acts as the agency's "lawyer" before federal appellate courts and provides legal advice to the Commission and other SEC divisions and offices;
• The Office of the Chief Accountant, which establishes and enforces accounting and auditing policies set by the SEC. This office has played an important role in such areas as working with the Financial Accounting Standards Board to develop Generally Accepted Accounting Principles, the Public Company Accounting Oversight Board in developing audit requirements, and the International Accounting Standards Board in advancing the development of International Financial Reporting Standards;
• The Office of Compliance, Inspections and Examinations, which inspects broker-dealers, stock exchanges, credit rating agencies, registered investment companies, including both closed-end and open-end (mutual funds) investment companies, money funds and Registered Investment Advisors;
• The Office of International Affairs, which represents the SEC abroad and which negotiates international enforcement information-sharing agreements, develops the SEC's international regulatory policies in areas such as mutual recognition, and helps develop international regulatory standards through organizations such as the International Organization of Securities Commissions and the Financial Stability Forum;
• The Office of Investor Education and Advocacy, which helps educate the public about securities markets and warns investors of fraud and stock market scams; and
• The Office of Economic Analysis, which helps the SEC estimate the economic costs and benefits of its various rules and regulations.
• The Office of Information Technology supports the Commission and staff of the SEC in all aspects of information technology. The Office has overall management responsibility for the Commission's IT program including application development, infrastructure operations and engineering, user support, IT program management, capital planning, security, and enterprise architecture.
• The Inspector General. The current IG, H. David Kotz, has served since December, 2007.^[14] Kotz has a staff of 22.^[15]

Relationship to other agencies[link]

In addition to working with various self-regulatory organizations such as NYSE and FINRA, the Securities and Exchange Commission also works with other federal agencies, state securities regulators, international securities agencies and law enforcement agencies.^[16]

In 1988 Executive Order 12631 established the President's Working Group on Financial Markets. The Working Group is chaired by the Secretary of the Treasury and includes the Chairman of the SEC, the Chairman of the Federal Reserve and the Chairman of the Commodity Futures Trading Commission. The goal of the Working Group is to enhance the integrity, efficiency, orderliness and competitiveness of the financial markets while maintaining investor confidence.^[17]

The Securities Act of 1933 was originally administered by the Federal Trade Commission. The Securities Exchange Act of 1934 transferred this responsibility from FTC to the SEC. The main mission of the FTC is to promote consumer protection and to eradicate anti-competitive business practices. The FTC regulates general business practices, while the SEC focuses on the securities markets.

The Temporary National Economic Committee was established by joint resolution of Congress 52 Stat. 705 on June 16, 1938. It was in charge of reporting to the Congress on abuses of monopoly power. The committee was defunded in 1941, but its records are still under seal by order of the SEC.^[18]

The Municipal Securities Rulemaking Board (MSRB) was established in 1975 by Congress to develop rules for companies involved in underwriting and trading municipal securities. The MSRB is monitored by the SEC, but the MSRB does not have the authority to enforce its rules.

While most violations of securities laws are enforced by the SEC and the various SROs it monitors, state securities regulators can also enforce state-wide securities laws known colloquially as Blue Sky laws.^[3] States may require securities to be registered in the state before they can be sold there. National Securities Markets Improvement Act of 1996 (NSMIA) addresses this dual system of federal-state regulation by amending Section 18 of the 1933 Act to exempt nationally traded securities from state registration, thereby pre-empting state law in this area. However, NSMIA preserves the states' anti-fraud authority over all securities traded in the state.^[19]

The SEC also works with federal and state law enforcement agencies to carry out actions against actors alleged to be in violation of the securities laws.

The SEC is a member of International Organization of Securities Commissions (IOSCO) and uses the IOSCO Multilateral Memorandum of Understanding as well as direct bilateral agreements with other countries Securities Commissions to deal with cross border misconduct in securities markets.

Related legislation[link]

• 1934 – Securities Exchange Act of 1934, governing the secondary trading of securities
• 1938 – Establishment of the Temporary National Economic Committee 52 Stat. 705
• 1964 – Securities Act Amendments PL 88-467
• 1968 – Williams Act (Securities Disclosure Act) PL 90-439
• 1975 – Securities and Exchange Act PL 94-29
• 1980 – Depository Institutions and Deregulation Money Control Act PL 96-221
• 1982 – Garn–St. Germain Depository Institutions Act PL 97-320
• 1984 – Insider Trading Sanctions Act PL 98-376
• 1988 – Insider Trading and Securities Fraud Enforcement Act PL 100-704
• 1989 – Financial Institutions Reform, Recovery, and Enforcement PL 101-73
• 1999 – Gramm-Leach-Bliley Act PL 106-102
• 2000 – Commodity Futures Modernization Act of 2000
• 2002 – Sarbanes–Oxley Act
• 2007 – Regulation NMS
• 2010 – Dodd–Frank Wall Street Reform and Consumer Protection Act

SEC communications[link]

Comment letters[link]

Comment letters are letters by the SEC to a public company raising issues and requested comments. For example, in October 2001, the SEC wrote to CA, Inc., covering fifteen items, mostly about CA's accounting, including five about revenue recognition. The chief financial officer of CA, to whom the letter was addressed, pleaded guilty to fraud at CA in 2004.

In June 2004, the SEC announced that it would publicly post all comment letters, to give investors access to the information in them. In mid-2005, Allan Beller, former head of the SEC's Division of Corporation Finance, said that the SEC believed that "it is appropriate to expand the transparency of our comment process by making this information available to an unlimited audience."

An analysis in May 2006 of regulatory filings over the prior 12 months indicates, however, that the SEC has not accomplished what it said it would do. The analysis found 212 companies that had reported receiving comment letters from the SEC, but only 21 letters (for these companies) were posted on the SEC's website. John W. White, the current head of the Division of Corporation Finance, told the New York Times: "We have now resolved the hurdles of posting the information.... We expect a significant number of new postings in the coming months."^[20]

No-action letters[link]

No-action letters are letters by the SEC staff indicating that the staff will not recommend to the Commission that the SEC undertake enforcement action against a person or company if that entity engages in a particular action. These letters are sent in response to requests made when the legal status of an activity is not clear. These letters are publicly released and increase the body of knowledge on what exactly is and is not allowed. They represent the staff's interpretations of the securities laws and, while persuasive, are not binding on the courts.

One such use, from 1975-2007, was with the nationally recognized statistical rating organization (NRSRO), a credit rating agency that issues credit ratings that the SEC permits other financial firms to use for certain regulatory purposes.

Regulatory action in the credit crunch[link]

The SEC announced on September 17, 2008, strict new rules to prohibit all forms of "naked short selling" as a measure to reduce volatility in turbulent markets.^[21][22]

The SEC investigated into cases involving individuals attempting to manipulate the market by passing false rumors about certain financial institutions. The commission has also investigated into trading irregularities and abusive short selling practices. Hedge fund managers, broker-dealers, and institutional investors were also asked to disclose under oath, certain information pertaining to their positions in credit default swaps. The commission also brought about the largest settlements in the history of the SEC (approximately $51 billion in all) on behalf of investors who purchased auction rate securities from six different financial institutions.

This section requires expansion.

Regulatory failures[link]

Christopher Cox, the former chairman of the SEC, has recognized the organization's own multiple failures in relation to the Bernard Madoff fraud.^[23] Starting with an investigation in 1992 into a Madoff feeder fund which only invested with Madoff, and which, according to the SEC, promised "curiously steady" returns, the SEC did not investigate indications that something was amiss in Madoff's investment firm.^[24] The SEC has therefore been accused of missing numerous red flags and ignoring tips on Madoff's alleged fraud.^[25] As a result, Cox has said that an investigation will ensue into "all staff contact and relationships with the Madoff family and firm, and their impact, if any, on decisions by staff regarding the firm."^[26] Approximately 45 per cent of institutional investors felt that better oversight by the SEC could have prevented the Madoff fraud.^[27] Harry Markopolos complained to the SEC's Boston office in 2000, telling the SEC staff they should investigate Madoff because it was impossible to legally make the profits Madoff claimed using the investment strategies that he claimed to use.^[28]

In June 2010, the SEC settled a wrongful termination lawsuit with former SEC enforcement lawyer Gary Aguirre, who was terminated in September 2005 following his attempt to subpoena Wall Street figure John J. Mack in an insider trading case involving hedge fund Pequot Capital Management.^[29] While the insider case was dropped at the time, a month prior to the SEC's settlement with Aguirre the SEC filed charges against Pequot.^[29] The Senate released a report in August 2007 detailing the issue and calling for reform of the SEC.^[30]

Inspector General office failures[link]

In 2009, the Project on Government Oversight, a government watchdog group, sent a letter to Congress criticizing the SEC for failing to implement more than half of the recommendations made to it by its Inspector General^[31] According to POGO, in the past 2 years, the SEC had taken no action on 27 out of 52 recommended reforms suggested in Inspector General reports, and still had a "pending" status on 197 of the 312 recommendations made in audit reports. Some of these recommendations included imposing disciplinary action on SEC employees who receive improper gifts or other favors from financial companies and investigating and reporting the causes of the failures to detect the Madoff ponzi scheme.^[32]

In a 2011 article by Matt Taibbi in Rolling Stone, former SEC employees were interviewed and they commented negatively on the agency's Inspector General's office. Going to the OIG was "well-known to be a career-killer."^[33]

Destruction of documents[link]

According to former SEC employee and whistleblower Darcy Flynn, also reported by Taibbi, the agency routinely destroyed thousands of documents related to preliminary investigations of alleged crimes committed by Deutsche Bank, Goldman Sachs, Lehman Brothers, SAC Capital, and other financial companies involved in the Great Recession that the SEC was supposed to have been regulating. The documents included those relating to "Matters Under Inquiry", or MUI, the name the SEC gives to the first stages of the investigation process. The tradition of destruction began as early as the 1990s. This SEC activity eventually caused a conflict with the National Archives and Records Administration when it was revealed to them in 2010 by Flynn. Flynn also described a meeting at SEC in which top staff discussed refusing to admit the destruction had taken place because it was possibly illegal.^[33]

Iowa Republican Sen. Charles Grassley, among others, took note of Flynn's call for protection as a whistleblower and the story of the agency's document-handling procedures. The SEC issued a statement defending its procedures. NPR quoted University of Denver law professor Jay Brown as saying, "My initial take on this is it's a tempest in a teapot," and Jacob Frenkel, a securities lawyer in the Washington, D.C., area, as saying in effect "there's no allegation the SEC tossed sensitive documents from banks it got under subpoena in high-profile cases that investors and lawmakers care about." NPR concluded its report:

The debate boils down to this: What does an investigative record mean to Congress? And the courts? Under the law, those investigative records must be kept for 25 years. But federal officials say no judge has ruled that papers related to early-stage SEC inquiries are investigative records. The SEC's inspector general says he's conducting a thorough investigation into the allegations. [Kotz] tells NPR that he'll issue a report by the end of September.^[34]

[edit] List of major SEC enforcement actions 2009-2012

The U.S. Securities and Exchange Commission's Enforcement Division has brought the following major actions in 2009 to 2012:

• In June 2009, the SEC sued Angelo Mozilo, former CEO of mortgage lender Countrywide Financial, and two other former officers, charging that they misled investors about the quality of Countrywide's loans while knowing the company was fueling its growth by letting its underwriting guidelines deteriorate and originating a growing number of risky subprime loans. In October 2010, the SEC settled the lawsuit and Mozilo was required to pay a fraction of the $521.5 million he had earned, just $67.5 million in penalties and disgorgement.^[35][36]

• In August 2009, the SEC filed a suit against Bank of America, alleging that the bank failed to disclose $3.6 billion in bonuses that Merrill Lynch paid its employees.^[37] In January 2010, the SEC filed another suit against the bank, alleging it failed to disclose extraordinary fourth-quarter 2008 losses at Merrill Lynch prior to a December 5, 2008 shareholder vote to approve a merger between it and Merrill Lynch. In February 2010, Jed S. Rakoff, a federal judge derided, but approved a settlement to resolve the lawsuits, having rejected a previous settlement for $33 million as too small. He called the new agreement "inadequate and misguided" because the penalties were "very modest."^[38]

• In October 2009, relying on informants and wiretaps, Raj Rajaratnam and his hedge fund, Galleon Group, were charged with an insider trading scheme that generated more than $25 million in illicit gains. Six others involved in the scheme were also charged, including senior executives at IBM, Intel and McKinsey & Company.^[39][40] Overall, the SEC in the Galleon series of cases has charged 29 defendants for widespread and repeated insider trading in the securities of more than 15 publicly traded companies, generating illicit profits or losses avoided of more than $90 million. The investigation involves cash payments by Rajaratnam and Galleon in exchange for material nonpublic information, and the investigation has ensnared corporate executives, consultants, rating agency personnel, proprietary traders, hedge fund executives, and public relations personnel. Rajaratnam was sentenced to 11 years in prison in the parallel criminal case, and the court entered a final judgment in the SEC civil case holding him liable for a civil penalty of $92.8 million, representing the largest penalty ever assessed against an individual in an SEC insider trading case.^[41][42]

• In December 2009, three former executives of New Century Financial Corporation were charged with conspiring to mislead investors by not disclosing dramatic increases in the rate of borrowers who were defaulting almost immediately on their loans.^[43]

• In April 2010, the SEC filed a suit against Goldman Sachs and one of its vice presidents, Fabrice Tourre, alleging that the firm misled investors with respect to a subprime mortgage product. The SEC charged that Goldman and Tourre did not inform clients that what they bought was crafted in part by hedge fund manager John Paulson, who was betting the product would fail. In July 2010, Goldman Sachs agreed to pay $550 million to settle the case, among the largest penalties ever assessed in the 76-year history of the SEC, although just 1% of Goldman's market value at the time and 2% of its cash balance in March 2010, and considered to be a "slap on the wrist".^[44] The penalties prompted a sigh of relief from Goldman and Wall Street.^[45] In announcing the settlement, Robert Khuzami, current director of the Enforcement Division, twice referred to it as "more than half a billion dollars", but Michael J. Driscoll, a professor and former senior managing director at Bear Stearns called it "a steal".^[45] A former SEC commissioner, Paul Atkins, said he was "embarrassed, as an American," describing the suit as "basically playing for headlines with very little substance."^[45] Eliot Spitzer said Goldman's reaction was "OK, we'll pay you $550 million to settle the Abacus case — that's a small price to pay for the $12.9 billion we got for the AIG bailout."^[46]

• In July 2010, Citigroup, with a market cap of $120 billion, agreed to pay a $75 million penalty^[47] to the SEC for its failure to adequately disclose its exposure to subprime mortgage debt. Citigroup advised investors it held $13 billion in subprime investments when in fact it was more than $50 billion. Fines for misconduct were also assessed against the former chief financial officer, Gary Crittenden, and director of investor relations, Arthur Tildesley.^[48][49]

• In September 2010, John Flannery, a former chief investment officer of State Street Bank & Trust Company, and James Hopkins, a former product engineer there, were charged with misleading investors about the bank's exposure to subprime investments. Earlier in the year, the SEC announced a settlement in which State Street agreed to pay $313 million in connection with the charges.^[50][51]

• In October 2010, the SEC charged two hedge fund portfolio managers and their investment advisory businesses, Palisades Asset Management, LLC with overvaluing illiquid fund assets they placed in a “side pocket,” misappropriating investor assets, and making material misrepresentations in connection with a securities offering.^[52]

• In December 2010, the SEC, the Department of Justice and other federal and state agencies announced the results of "Operation Broken Trust," a coordinated effort by the Financial Fraud Enforcement Task Force to target investment fraud. The operation resulted in prosecutions against 310 criminal defendants involving $8.3 billion in losses and civil actions against 189 defendants involving $2.1 billion in losses for fraud schemes that victimized more than 120,000 people throughout the country.^[53]

In FY 2011, the Enforcement Division filed 735 actions, an 8.6% increase over FY 2010 and more than any other year in SEC history. It also obtained $2.8 billion in penalties and disgorgement.^[54] More significantly, the filed actions involve many highly complex markets, products and transactions, as well as charges against a significant number of individuals. One commentator noted that despite budget and other restraints, the SEC has recently “had a string of successes,” and has made progress “despite every disadvantage.”^[55] A sampling of FY 2011 and 2012 cases are set forth below.

• In January 2011, the SEC charged Merrill Lynch with fraud for misusing customer order information to place proprietary trades for the firm and for charging customer undisclosed trading fees.^[56]

• Also in January 2011, the SEC charged two Charles Schwab & Co. Inc. entities and two executives for failing to disclose the risks of investing in the YieldPlus fund, including its over-concentration in mortgage assets and that it was not, as Schwab advertised, a cash alternative that had only slightly higher risk than a money market fund. ^[57]

• In February 2011, the Commission brought charges in the “expert networking” insider trading cases, charging several technology company employees with tipping material nonpublic information concerning sales, earnings, and other performance data of their employers to multiple hedge funds and other investment professionals.^[58]

• In February 2011, the SEC charged DHB Industries, Inc., a major supplier of body armor to the U.S. military and law enforcement agencies, for engaging in a large accounting fraud, and in addition separately charged three of DHB’s former outside directors and audit committee members for their complicity in the scheme.^[59]

• In March 2011, the SEC charged three senior executives at Fair Finance Company with orchestrating a $230 million fraudulent scheme involving at least 5,200 investors, many of them elderly, by selling them interest-bearing certificates allegedly used to purchase and service discounted consumer finance contracts, but instead diverting the proceeds to themselves and others for luxury personal goods as well as to struggling and unprofitable entities that they controlled.^[60]

• In March 2011, the Commission charged Cheng Yi Liang, a chemist at the U.S. Food and Drug Administration (FDA), with insider trading by trading securities using highly confidential information relating to FDA drug approvals that he accessed from an FDA database.^[61]

• In April 2011, the Commission charged Matthew Kluger, a former corporate attorney, and Garrett Bauer, a Wall Street trader, for their involvement in a highly organized serial insider trading ring that traded in advance of at least 11 pending merger and acquisition announcements involving clients of the law firm Wilson Sonsini Goodrich & Rosati.^[62]

• In April 2011, the SEC charged Wachovia with misconduct related to the sale of two collateralized debt obligations (CDOs), including charging excessive markups in sales to the Zuni Indian Tribe, and falsely representing that it acquired CDO assets at fair market prices when, in fact, 40 residential mortgage-backed securities (RMBs) were transferred from an affiliate at above-market prices to avoid losses on its own books.^[63]

• In April 2011, the Commission charged Dr. Joseph “Chip” Skowron, a former portfolio manager for six health care-related hedge funds, with insider trading in a bio-pharmaceutical company based on confidential information he received unlawfully about the company’s negative clinical drug trial results.^[64]

• In May 2011, the Commission charged Donald L. Johnson, a former managing director of The NASDAQ Stock Market, with insider trading on confidential information that he misappropriated while working in a market intelligence unit that communicates with executives at listed companies about impending public announcements that could affect their stocks.^[65]

• In May, July and December 2011, the SEC charged J.P. Morgan Securities, Wachovia Bank and UBS Financial Services for participating in a wide-ranging scheme involving the fraudulent manipulation of municipal bond reinvestment transactions. Including previous actions filed against GE Funding Capital Market Services and Banc of America Securities, a total of approximately $743 million has been recovered in these settlements by all law enforcement agencies, including the SEC, involved in the cases.^{[66][67][68][69][70]}

• In June 2011, the SEC charged J.P. Morgan Securities and one individual with misleading investors in a complex mortgage securities transaction by not informing investors that a prominent hedge fund helped select the assets in the CDO portfolio and had a short position in more than half of those assets.^[71]

• In August 2011, the SEC charged Stifel, Nicolaus & Co. and a former Senior Vice President with defrauding five Wisconsin school districts by selling them synthetic CDOs funded largely with $200 million of borrowed money.^[72]

• In September 2011, the SEC charged AXA Rosenberg and its founder, Barr Rosenberg, with fraud for concealing a significant error in the computer code of the quantitative investment model used to manage client assets. AXA Rosenberg paid $217 million to compensate harmed investors and a $25 million penalty. Barr Rosenberg paid a $2.5 million penalty and was barred from the industry for life.^[73][74]

• In October 2011, the SEC sanctioned two electronic stock exchanges and a broker-dealer owned by Direct Edge Holdings LLC for violations arising out of weak controls that resulted in millions of dollars in trading losses and a systems outage.^[75]

• In October 2011, the SEC charged Pipeline Trading Systems LLC and two of its top executives with failing to disclose to customers of Pipeline’s “dark pool” trading platform that the vast majority of orders were filled by a trading operation affiliated with Pipeline.^[76]

• In October 2011, the SEC charged Citigroup with misleading investors about a $1 billion CDO by exercising significant influence over the selection of assets included in the CDO portfolio, and then taking a proprietary short position against those mortgage-related assets from which it would profit if the assets declined in value. Citigroup agreed to settle the SEC’s charges by paying a total of $285 million. The district court’s rejection of the proposed settlement is on appeal to the Second Circuit Court of Appeals.^[77]

• In October 2011, the SEC charged former bank executives of California-based United Commercial Bank with concealing from investors large losses on several loans made by the bank and that appraisals for some of the loans had been reduced dramatically or that collateral securing the loans was insufficient or worthless.^[78]

• In October 2011, the SEC charged former McKinsey & Company Global Head Rajat Gupta with insider trading for illegally tipping Raj Rajaratnam with insider information about the quarterly earnings of both Goldman Sachs and Procter & Gamble, as well as an impending $5 billion investment in Goldman by Berkshire Hathaway at the height of the financial crisis.^[79]

• In December 2011, the SEC charged six former top executives of Fannie Mae and Freddie Mac, including two former CEOs, with misleading investors about the extent of each company’s holdings of subprime and other higher-risk mortgages.^[80]

• In December 2011, the SEC charged seven former Siemens executives with anti-bribery violations for their actions in the decade-long bribery scheme to retain a $1 billion government contract to produce national identity cards for Argentine citizens.^[81]

• In January 2012, the SEC charged two multi-billion dollar hedge fund advisory firms, Diamondback Capital and Level Global, as well as seven fund managers and analysts, involved in a $78 million insider trading scheme based on nonpublic material information about Dell’s quarterly earnings and other similar inside information about Nvidia Corporation.^[82]

• In February 2012, the SEC charged four former investment bankers and traders at Credit Suisse Group for engaging in a complex scheme to fraudulently overstate the prices of $3.0 billion in subprime bonds during the height of the financial crisis.^[83]

• In March 2012, the SEC charged the three senior-most executives at Thornburg Mortgage, Inc., formerly one of the nation’s largest mortgage companies, with hiding the company’s deteriorating financial condition at the onset of the financial crisis.^[84]

• In March 2012, the SEC charged two managers with making false statements and pocketing undisclosed fees and commissions in connection with two private investment funds established solely to acquire the shares of Facebook and other Silicon Valley firms. Also charged was SharesPost, an online service that matches buyers and sellers of pre-IPO (initial public offering) stock, for engaging in securities transactions without registering as a broker-dealer.^[85]

• In April 2012, the SEC charged Franklin Bank’s former CEO and CFO for their involvement in a fraudulent scheme designed to conceal the deterioration of the bank’s loan portfolio and inflate its reported earnings during the financial crisis.^[86]

• In May 2012, the SEC charged UBS Puerto Rico and two executives with making misrepresentations about the liquidity and pricing of 23 proprietary closed-end funds, and concealing that it advantaged its own proprietary trades over those of its customers as it reduced its exposure to these assets.^[87]

References[link]

Forms[link]

SEC Forms List by category

• Form 4 (stock and stock options ownership and exercise disclosure)
• Form 8-K
• SEC Form 10-K
• Form S-1 (IPO)

See also[link]

• Category:Financial regulation in the United States
• Category:United States federal financial legislation
• Category:United States proposed federal legislation
• Commodity Futures Trading Commission
• Securities Commission
• Chicago Stock Exchange
• Financial regulation
• List of financial regulatory authorities by country
• NASDAQ
• New York Stock Exchange
• Stock exchange
• Regulation D (SEC)

External links[link]

• U.S. Securities and Exchange Commission website
• What the SEC does
• SECLaw.com – The Securities Law Home Page
• Introduction to the Federal Securities Laws
• United States Securities Laws and Rules
• Hedge Fund Regulation by the SEC
• Take a Look at the Securities and Exchange Commission Dead link as of Aug 17, 2010
• SEC Historical Society – Archive and Museum – nonprofit and independent from the SEC
• Association of Securities and Exchange Commission Alumni, Inc.
• TheCorporateCounsel.net (USA) Home of popular securities law blog and related resources
• Understanding the Securities Exchange Commission--About.com
• SecuritiesLinks Links to U.S. securities laws, rules, forms and other resources
• SEC Accounting Bulletins – United States
• SEC Division of Corporate Finance – United States
• SEC Said to Examine More Ponzi Schemes, Bloomberg.com

v t e Chairmen of the United States Securities and Exchange Commission Kennedy · Landis · Douglas · Frank · Eicher · Purcell · Caffrey · Hanrahan · McDonald · D Cook · Demmler · Armstrong · Gadsby · Cary · Cohen · Budge · Casey · B Cook · Garrett · Hills · Williams · Shad · Ruder · Breeden · Levitt · Pitt · Donaldson · Cox · Schapiro

Arunma Oteh became Director General of the Securities and Exchange Commission (SEC) in Nigeria in January 2010. In this position she is responsible for regulation of Nigeria's capital markets, including the Nigerian Stock Exchange.^[1]

Background[link]

Arunma Oteh is of Nigerian/British nationality. She is from Abia State. She studied at the University of Nigeria in Nsukka, Nigeria, earning a first class honors degree in Computer Science. She went on to the Harvard Business School where she obtained a Masters Degree in Business Administration. She co-edited the book, African Voices African Visions.^[2]

Early career[link]

Oteh worked for various institutions including the Harvard Institute for International Development and Centre Point Investments Limited of Nigeria in corporate finance, consulting, teaching and research. She joined the African Development Bank (ADB) in 1992.^[2] She was a Senior Investment Officer/Senior Capital Markets Officer from 1993 to 1997, then Division Manager Investments and Trading Room from 1997 to 2001 when she was appointed the Bank's Group Treasurer responsible for fund raising and investments in major international capital markets.^[3] Oteh was appointed Vice-President for Corporate Management at the ADB in March 2006, responsible for Language Services, General Services and Procurement, Human Resources, and Information Management and Methods.^[2]

SEC Director General[link]

The SEC Director General Musa Al-Faki resigned in April 2009 amid criticism of the SEC role in a share-manipulation scandal involving African Petroleum stock.^[4] Oteh was nominated Director-General and Executive Commissioner (Legal & Compliance) of the Securities & Exchange Commission by President Umaru Yar'Adua in July 2009, subject to Senate confirmation.^[3] Arunma Oteh became Director General of the SEC in January 2010.^[4]

In a June 2010 interview with the BBC Oteh listed "wash sales, market rigging, pumping and dumping shares" as some of the abuses in Nigeria's capital market. She said the SEC expected to charge about 200 individuals and entities in civil or criminal cases. She faced resistance from the powerful Nigerian rent-seeking elite, but expressed confidence due to the backing she had received from President Goodluck Jonathan.^[1] In August 2010 Oteh dismissed Okereke-Onyiuke from the stock exchange.^[4]

Bibliography[link]

• Olugbenga Adesida, Arunma Oteh (2004). African voices, African visions. Nordic Africa Institute. ISBN 91-7106-530-X. 

References[link]

Dennis Kelleher (20 November 1918 – 20 February 2002) was an Irish footballer who represented Great Britain at the 1948 Summer Olympics.^[1][2] Donovan played amateur football with Barnet, winning the FA Amateur Cup in 1946; he also earned 8 amateur caps for Ireland.^[3]

During World War II, Kelleher served as a Lieutenant in the Royal Naval Volunteer Reserve, and was captured while serving in Egypt, later escaping from a German prisoner-of-war camp.^[4][5]

References[link]

v t e Great Britain squad – 1948 Summer Olympics Aitken Amor Boyd Carmichael Donovan Fright Hardisty A. Hopper T. Hopper Kelleher Kippax Lee Letham Manning McAlinden McBain McColl McIlvenny Neale Phipps Rawlings Simpson Smith Coach: Busby

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