New York partner John Carney and associate Dennis Cohen co-authored an article, "Turning Up The Heat: Staying Ahead of the SEC's New Accelerated Enforcement Strategy," which was published in the June 1, 2009, edition of the New Jersey Law Journal.
According to Carney and Cohen, "SEC Chairman Mary Schapiro's recent statements about the commission's plans for aggressive and accelerated investigations should serve as a warning for attentive companies that the usual rules of engagement have changed. Fast-tracked formalization of investigations, delegated penalty negotiation authority, and improved whistleblower complaint processing will place the unprepared company or individual at a critical disadvantage."
The authors go on to detail the planned changes, which include engaging an outside research center "to improve the efficiency and effectiveness of how the SEC uses tips from whistleblowers" and potentially compensating whistleblowers; reversing constraints formerly placed upon the staff, giving them the accelerated ability to formalize investigations and thereby greater power to issue subpoenas for testimony and documents, and greater authority to negotiate cases that impose monetary penalties; increasing the number of SEC trial attorneys and paralegals and para-professional support, "creating specialized groups of attorneys along product, market or transactional lines and increasing collaboration among staff across regions," and "reconfiguring the management structure of the division and reducing the levels of review and approvals required for investigative steps to be taken."
Carney and Cohen continue: "While the goal of every public company and individual is to avoid an SEC investigation in the first place, the realities of the current legal and economic environment make it likely that more and more companies and individuals will be faced with the prospect of dealing with the SEC as a witness or as a target. Accordingly, the primary objective for any public company or individual is to be ahead of the curve in dealing with the SEC in a potential or actual investigation."
The authors' recommendations to companies include:
The authors conclude: "The SEC may have turned up the heat, but with the use of solid compliance procedures and a proactive investigative strategy, this doesn’t mean you have to get burned."
To read the full article, click here.