SEC Wants to Seize Lawbreakers’ Homes, Sue for Restitution
The Securities and Exchange Commission wants to be able to seize the houses of executive lawbreakers and hire private lawyers to sue them for funds to reimburse investors harmed by corporate wrongdoing, an SEC official told Congress on Wednesday.
State laws often exempt a person’s home from being seized by creditors, Stephen Cutler, the SEC’s enforcement director, said at a hearing of the House Financial Services capital markets subcommittee.
“The homestead exemptions can really stand in the way” of getting money back to investors, he said.
Financial scandals at Enron Corp. and other companies caused thousands of investors to lose money and spurred Congress last year to make it easier for the SEC to distribute cash penalties to investors to cover their losses. The SEC and some lawmakers now say the law must be refined to obtain more restitution for investors.
“We are going to give it back to the investors,” said Rep. Richard H. Baker (R-La.). Baker said he expected to draw up a bill soon to aid restitution.
The SEC wants Congress to pass a law to remove state barriers to its collecting money from wrongdoers. The agency also wants greater freedom to give the penalties it collects to investors.
State homestead exemptions can drag out SEC enforcement cases and enable defendants to shelter assets, Cutler said.
“We’ve all seen photographs of very lavish homes that have been built” by some defendants in SEC cases, he said.
The SEC also wants to be able to obtain grand jury information from the Justice Department in more circumstances and earlier in the investigation than now is allowed.
Cutler also said the SEC wants authority to fine individuals and companies without going to court.
Under current law, the SEC can impose fines on its own through an administrative process only if the individual or company being fined is regulated by the SEC. In all other cases, the SEC must file a federal court action seeking financial penalties.
Any fines imposed in an administrative proceeding could be appealed to a federal court, ensuring due process protections, Cutler said.
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Certifications Under Review by SEC
The first possible violations of a new law requiring top executives to swear by their companies’ financial results are being probed, a top SEC official said Wednesday.
Without naming names, the director of the SEC Division of Corporation Finance, Alan Beller, said his unit, which reviews thousands of companies’ financial disclosures, has referred a few matters to the SEC’s enforcement division for review.
“We’ve asked enforcement to look at some relatively small number of cases where we think there may be an issue. They haven’t acted yet,” Beller said.
The SEC last summer ordered the chief executives and chief financial officers of 942 big companies to certify results beginning with their most recent annual reports.
Congress expanded the idea and made certification a quarterly duty for top company executives in its Sarbanes-Oxley Act, passed in July.
About 14,000 SEC-regulated companies now are required to include personal pledges by their CEOs and CFOs in quarterly and annual reports saying results are accurate and complete.
From Reuters
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House OKs More Emergency Powers
The House has approved a bill to give the SEC more power over the markets in case of another emergency such as the Sept. 11 attacks.
The SEC could take wider and longer-lasting control of markets in emergencies under the bill, which closely resembles one passed by the House in 2001 but was never approved by the Senate.
From Reuters
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Civil Charges May Be Filed Against Morgan
Federal regulators, expanding a probe into alleged public offering abuses, reportedly have signaled they may file civil charges against investment bank Morgan Stanley.
Citing people familiar with the matter, the Wall Street Journal reported Wednesday that the SEC may file charges alleging the securities firm doled out shares to investors based partly on their commitments to buy additional stock after trading began.
The SEC staff has informally indicated to Morgan Stanley that it plans to notify the firm of the planned charges, the paper reported. Morgan Stanley has denied wrongdoing to the regulators, one person familiar with the talks said.
From Reuters
