Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Saturday, May 30, 2020

Willcox on the SEC Office of the Whistleblower

Thomas Willcox has posted The SEC Office of Whistleblower Fails to Take Action On A Potential Finance-Industry Wide Accounting Irregularity, With Possible Failure To Record As Short Term Liabilities Purchase Obligations in Private Placement Transactions on SSRN with the following abstract:

Since 2010, the enforcement of the Exchange Act by the Securities & Exchange Commission (“SEC”) has been bolstered by that agency’s Office of the Whistleblower (“OOW”). Since the creation of the OOW through the end of fiscal year 2017, the commission has received over 22,000 whistleblower tips. The Commission has obtained over $1.4 billion in financial remedies based on original information provided by whistleblowers. However, the SEC has issued an oral “No Further Action” on a claim brought by the Author that the industry is, regularly and systematically, failing to comply with a “no action letter” that prohibits any “unilateral outs” when the banks make a “firm commitment” to purchase securities. The author believes that the banks violate this “no action letter” in order to justify failing to record multi million dollar obligations to purchase securities as short terms liabilities. This article recommends the SEC prosecute such an action, retaining outside counsel if necessary.

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