Stock Ethics and Philosophy 101

[Huggy Bear]

Yup. Check out SIMH. Enough said. Classic pump and dump. Classic illegal promotion. Classic company dumping into a willingly ignorant get rich quick crowd.

Too bad the frontloaders always seem to get away with everyone's money.

Good news out to the main office today though:

Ceresney elaborated on how the theory has been put into practice. “It’s not about turning every violation into an enforcement action,” he said. “What it’s about is targeting important rules [where] we’ve seen a pattern of lack of compliance,” and using the cases “to send a strong message about the need for compliance.”

SEC Enforcement Leaders Debate Broken-Windows Policy

October 14, 2014 5:26 PM EDT
http://www.nationallawjournal.com/legaltimes/home/id=1202673370778/SEC-Enforcement-Leaders-Debate-BrokenWindows-Policy?mcode=1202615432600&curindex=1&back=NLJ&slreturn=20140914180607

U.S. Securities and Exchange Commission Enforcement Division head Andrew Ceresney on Tuesday defended the agency’s “broken windows” policy of cracking down on minor violations during a panel discussion with five former directors of the division, who argued the agency is being too harsh.

The message from SEC staff is “any violation and you’re in the soup,” said Wilmer Cutler Pickering Hale and Dorr partner William McLucas , who led the enforcement division from 1989 to 1998. “There’s zero tolerance.”

The remarks came during the Securities Enforcement Forum in Washington, where last year SEC Chairwoman Mary Jo White introduced the broken-windows concept. “The theory is that when a window is broken and someone fixes it, it is a sign that disorder will not be tolerated,” she said. “But when a broken window is not fixed, it ‘is a signal that no one cares, and so breaking more windows costs nothing. The same theory can be applied to our securities markets—minor violations that are overlooked or ignored can feed bigger ones.”

Ceresney elaborated on how the theory has been put into practice. “It’s not about turning every violation into an enforcement action,” he said. “What it’s about is targeting important rules [where] we’ve seen a pattern of lack of compliance,” and using the cases “to send a strong message about the need for compliance.”

For example, he said, executives and corporate insiders need to file paperwork about buying and selling securities in their companies. “That’s critical to investors,” he said. In September, the SEC charged 28 officers, directors or major shareholders with failing to promptly report information about their holdings and transactions.

“It is not about stepping away from the larger, more intent-based violations. In fact, to the contrary,” Ceresney said. “That’s what we’re trying to foster, a broad sense that there needs to be compliance across the board.”

But Davis Polk & Wardwell partner Linda Chatman Thomsen, who was enforcement director from 2005 to 2009, questioned whether the punishments fit the crime.

“Are the sanctions and reactions responsive to the underlying conduct?” she asked. “There was a time when if you came in and said “I missed a filing,” someone would say ‘Correct the filing,’” she continued. “Then there was a time when something might happen, but it wouldn’t involve a penalty. Now we’re seeing matters where they truly look like, relatively speaking, modest violations with, relatively speaking, large sanctions. And that, to a certain extent, that may backfire in terms of encouraging cooperation … because the reaction is disproportionate.”

McLucas agreed, noting that the cases involve people who are “not a threat to the markets, didn’t steal, didn’t commit fraud, but they’re going to get named,” he said. “The perception out here in this environment is if you catch one that doesn’t meet the six-inch test, you don’t throw it back.”

Former U.S. District Judge Stanley Sporkin, who headed the enforcement division from 1974 to 1981, didn’t see it that way. “I don’t know why this is news,” he said. “You go back to my day, you can’t be a law enforcement commission if you don’t enforce the rules. If you’ve got to comply, you’ve got to comply, that’s all there is to it.”

He turned to McLucas, who joined the SEC in 1977 under Sporkin. “We even brought a failure to file 16a case criminally, remember that, the Friedman case?”

“I’ve erased it from my memory,” McLucas said to laughter. “Whose side are you on here? [Ceresney] doesn’t need any encouragement.”

http://www.nationallawjournal.com/legaltimes/home/id=1202673370778/SEC-Enforcement-Leaders-Debate-BrokenWindows-Policy?mcode=1202615432600&curindex=1&back=NLJ&slreturn=20140914180607

Thanks scion.