Major SEC Enforcement Actions Since 2009

Major SEC Enforcement Actions Since 2009

The United States Securities and Exchange Commission (SEC) has been extremely busy since the financial crisis. The SEC’s increase in its efforts to tackle violations has managed to shine light on and eradicate some of the most harmful practices of the financial services sector.  Though it’s still a work in progress, some of the most significant cases have helped to move the industry in the right direction.

Here’s a look at the some of the biggest enforcement actions the SEC has taken in the past 5 years.

Bank of America

Bank of America’s problems began with the merger with Merrill Lynch. The SEC first filed suit against the massive bank alleging they did not fully disclose $3.6 billion paid to employees of the bank as bonuses in the year 2009. Banker bonuses have obviously been a hot topic of discussion since then.

Later the bank was sued when the SEC alleged that fourth quarter loses were not fully disclosed to shareholders before the merger between the two banks went to vote in the year 2008. When an effort to settle the issue for $33 million was deemed inadequate, the bank raised its settlement amount to and the court case was resolved in 2010.

Raj Rajaratnam

Galleon Group hedge fund manager Raj Rajaratnam was charged (along with some very high profile executives from companies such as IBM, McKinsey and Intel) for insider trading activities in 2009. Rajaratnam was said to have earned $25 million illicitly from insider trading activities at the firm, and there was a firm base of wiretap and surveillance evidence against him.

All together 29 individuals were charged as part of this case and the total amount of illicit gains were estimated by the SEC at $90 million. Raj Rajaratnam was charged with arranging cash payments to acquire material non-public information from top executives at some firms and was sentenced to 11 years in prison for this. He was further held liable for $92.8 million, which was (at the time) the single heaviest penalty the SEC has ever levied against an individual.

Goldman Sachs

Goldman Sachs and one of its employees, Fabrice Torre, were charged with misleading investors with regard to a certain subprime mortgage financial product. The bank failed to inform clients that the product was designed partly by a hedge fund manager, John Paulson, who was betting the asset would fail.

The bank agreed to settle the case in 2010 for $550 million, which is one of the largest penalties awarded to the SEC in its entire history as a regulatory body. But the fact that the cash was about two percent (2%) of the banks market capitalization and about one percent (1%) of the cash the bank had on its balance sheet at the time led many to believe the penalty was inadequate and little more than a ’slap on the wrist.’

Over the course of its 76 year history the SEC has brought numerous lawsuits against some of the biggest players on Wall Street but is still considered by many to be too lenient in its actions.  That perception is harder to justify since their ramped up enforcement efforts as of late.  What are your thoughts?  Head over to our Facebook page to comment with your take on the SEC’s actions.

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