Thursday, May 31, 2007
The word for months was that the SEC was striving to achieve consensus and set a consistent policy in imposing penalties on corporations for violations of the federal securities laws. This was the explanation for the long delay in finalizing settlements in the stock options backdating cases. So, with the settlements in Mercury and Brocade, can we discern a consistent policy? I confess that, on an initial quick glance, I do not see it. Brocade was settled for $7 million civil penalty; the period of fraud lasted five years, and the SEC press release mentions that the company's audit committee conducted a thorough investigation when the abuses surfaced, surely a mitigating factor. Mercury was settled for $28 million penalty. In that case, the fraud lasted eight years, and the SEC press release emphasizes the "widespread and pernicious misconduct" in that case. But identification of these factors does not make out a policy to account for the difference between $7 million and $28 million, to my mind. Anyone have any additional insights?