the SEC found enough wrong with SPNG in their preliminary investigation to suspend.
and they also found enough to launch a formal investigation .. if there were no serious issues only a non formal investing would have taken place and most likely the issues would have been solved long ago
2. A Guide to Matters Under Inquiry (“MUIs”) and the Stages of Informal and Formal Investigations
` 2.1 General Policies and Procedures 2.1.1 Ranking Investigations and Allocating Resources Introduction:
The Division of Enforcement handles a number of investigations which vary in their size, complexity, and programmatic importance. Devoting appropriate resources to investigations which are more significant will help ensure high quality investigations and maximize desired program outcomes. In quarterly reports to the Director, Home Office Associate Directors and Regional Directors list their top ten investigations and rank their top three investigations. The top three investigations are ones which he or she considers to be critically important, while the top ten are considered significant. To achieve consistency in this area, Home Office Associate Directors and Regional Directors should take into account certain criteria when ranking their top three investigations and listing their top ten investigations so that they may effectively make decisions regarding resource allocation among all competing investigations. Considerations When Ranking an Investigation: To determine their top three and top ten investigations, Home Office Associate Directors and Regional Directors should evaluate at least three factors for each investigation under their responsibility: • the programmatic importance of an enforcement action, considering: • whether the subject matter is an SEC priority • whether the subject matter is a Division priority • whether an action would fulfill a programmatic goal of the SEC or the Division • whether an action would address a problematic industry practice • whether the conduct undermines the fairness or liquidity of the U.S. securities markets • whether an action would provide an opportunity for the SEC to address violative conduct targeted to a specific population or community that might not otherwise be familiar with the SEC or the protections afforded by the securities laws • whether an action would present a good opportunity to coordinate with other civil and criminal agencies 5 • whether the conduct can be addressed by any other state or federal regulators • whether an action would alert the investing public of a new type of securities fraud • the magnitude of the potential violations involved in the investigation, considering: o the egregiousness of the conduct o the length of time the conduct continued, or whether it is ongoing o the number of violations o whether recidivists were involved o whether violations were repeated o the amount of harm or potential harm to victims o the amount of ill-gotten gains to the violators o whether victims were specifically targeted based on personal or affinity group characteristics o for issuers or regulated entities, whether the conduct involved officers, directors, or senior management o whether gatekeepers (such as accountants or attorneys) or securities industry professionals are involved • the resources required to investigate the potential violations, considering: o the complexity of the potential violations o the approximate staff hours required over the course of the investigation o the number of staff assigned o the amount of travel required o the duration of the relevant conduct o the number of potential violators o the number and location of potential witnesses 6 o the number and location of relevant documents to be reviewed Although determining the overall significance of the investigation should take the factors above into consideration, the ranking of an investigation is a judgment to be made by the Home Office Associate Directors and Regional Directors, based on all facts and circumstances known to date. For example, an investigation ranked in the top three might include a complex investigation into a potentially egregious accounting fraud that has a very high resource requirement (and the longest amount of time needed to complete the investigation). However, an investigation into a potential market manipulation that may result in a trading suspension might also rank in the top three, despite the lower amount of resources needed, the shorter time needed to complete the investigation, and the smaller number of harmed investors because the conduct is egregious and requires urgent action. Considerations When Allocating Resources Among Investigations: Allocating resources among investigations requires that Associate and Assistant Directors1 exercise flexibility and creativity. Associate and Assistant Directors will normally assign staff to more than one investigation at a time, specifying the priorities of competing investigations so that staff members may plan their work. Priorities among investigations may change rapidly depending on the stage of the investigation. For example, two significant investigations may compete for resources, but staff may be assigned to review and analyze evidence in one investigation while waiting for documents to be produced in another investigation. Therefore, when allocating resources among competing investigations, Associate and Assistant Directors should take into account not only the significance of the investigation, but the phase of the investigation, considering, among other things: • whether there is an urgent need to file an Enforcement action, such as an investigation into ongoing fraud or conduct that poses a threat of imminent harm to investors • the volume of evidence that the staff must collect and review, such as trading records, corporate documents, and e-mail correspondence • the level of analysis required for complex data and evidence, such as auditor workpapers, bluesheets, or financial data • the number and location of witnesses and the scheduling of the testimony • travel requirements 1 The term “Assistant Directors” includes Assistant Directors in the Home Office and Assistant Regional Directors in the Regional Offices. 7 • timelines for writing internal memos, evaluation of the case by pertinent SEC Offices and Divisions, and consideration of the matter by the Commission • coordination with and timing considerations of other state and federal authorities For investigations ranked in the top three, Associate and Assistant Directors should consider assigning a minimum of two permanent staff attorneys to ensure that there is continuity on the investigation in the event of absences or staff transitions. In addition, the assignment of at least two attorneys may contribute to a collaborative approach that improves the quality of the investigation and promotes accountability. Additional attorneys may be assigned depending on the phase of the investigation. 2.1.2 Six-Month Review of Investigations and Status Updates Introduction: Each investigation, whether formal or informal, should be reviewed by the assigned staff (Assistant Director level and below) at each six-month mark after the investigation is opened. In addition to the staff’s continuing entry of information into the Hub (including, for example, adding the names of new staff assigned to the investigation and removing the names of staff no longer assigned), the status of the information should be checked and a narrative update should be entered into the Hub at the six-month mark. Although each investigation is unique and does not conform to a particular time frame, the six-month reviews and updates will allow senior management (Associate Director level and higher) to assess the progress of an investigation and evaluate whether the investigation continues to be an appropriate allocation of resources. Basics: • The assigned staff should review the investigation and update the status of an ongoing investigation on each six-month anniversary of the opening date of the investigation. • The narrative update on the Hub system should be included in the “Current Summary” narrative box under the “Nature/Substance of Case” tab for their investigation. In addition, the staff should submit the text of the update to a Deputy Director by e-mail. • The narrative in the Hub should explain any change in the original analysis contained in the case opening narrative regarding whether the investigation is an appropriate use of resources. In particular, the assigned staff should keep in mind whether the conduct is still within the statute of limitations period. • The narrative should note the stage of the investigation and any major events or milestones that have occurred in the prior six months. For example, the staff 8 might note that they are taking testimony, that they are conducting settlement negotiations, or that a potential defendant has been indicted. • The six-month review should include a review of information entered into the Hub concerning the investigation. Any inaccurate or out-of-date information should be corrected. Exception: An update is not required if an investigation is open, but is inactive because a civil action, administrative proceeding, or other event is in progress and the collection of information under the investigation has ceased. However, if an investigation is ongoing despite the filing of a civil action or the institution of an administrative proceeding (for example, if the investigation is ongoing as to persons not named in the action), then the staff must continue to update the status of the ongoing portion of the investigation.
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