Posted On: March 19, 2013

Securities Law and Congress Roundup: SEC Plans to Look at Corporate Political Spending Has Some Republicans Asking Why, Regulator Wants Lawmakers To Set Up Independent Auditor for Advisory Firms, & DOJ Stands by Its Record on Prosecuting Financial Firms

SEC Plans to Look at Corporate Political Spending Has Some Republicans Asking Why
In a letter to Securities and Exchange Commission Chairman Elisse Walter, a number of House Republicans, including Oversight Committee Chairman Darrell Issa (R-Calif.) and House Financial Services Committee Chairman Jeb Hensarling (R-Texas), asked why the agency plans to consider making corporate political spending disclosures a requirement when this matter seems “unrelated to its mandate” that it protect investors, maintain the markets, and “facilitate capital formation.” The lawmakers expressed concern that such a move by the SEC would be “especially problematic” seeing as it has no experience in this matter and the writing of such a rule would likely require much in terms of resources and staff.

The Congressional lawmakers said that the Commission should concentrate not on a “discretionary rule” but on a rulemaking that is mandatory. They pointed to the agency’s delays in getting the Jumpstart Our Business Startups Act efected in time for the mandated statutory deadline. They are asking why resources should be allocated to non-essential rulemaking that brings up serious concerns.

Regulator Wants Lawmakers To Set Up Independent Auditor for Advisory Firms
Recently, Ex- Securities and Exchange Commission Chairman Harvey Pitt recently said that setting up an independent entity to perform regulatory audits and compliance of investment advisors is the best way to make sure that these firms are properly examined. Pitt suggested that this entity would report to the SEC’s Office of Compliance Inspections and Examinations and help to detect certain types of fraud that might otherwise be missed.

Giving the keynote speech at the Investment Adviser Association's compliance conference on March 7, Pitt said that the Dodd-Frank Wall Street Reform and Consumer Protection Act is among recent developments that have changed the landscape for investment advisers. He suggested that the latter will have to flexible in dealing with the added regulatory requirements and challenges.

US Justice Department Stands by Its Record on Prosecuting Financial Firms
Responding to US Senators Sherrod Brown (D-Ohio) and Charles Grassley (R-Iowa) in a letter, the US Department of Justice said that while it is ready to file criminal cases against financial corporations when there is sufficient evidence, it considers deferred prosecutions and non-prosecution agreements as the essential “middle ground” between not acting at all and filing criminal cases where innocent parties would likely get hurt. Earlier this year, Grassley and Brown had asked the DOJ whether it thought some financial institutions were too important “to jail.” Noting that the department uses the U.S. Attorney's Manual to determine whether to prosecute entities, Principal Deputy Assistant Attorney General Judith Applebaum noted that, per the manual, no corporate entity that has prosecutorial immunity.

Securities Fraud
At Shepherd Smith Edwards and Kantas, LTD, LLP, our securities attorneys help investors with civil claims and lawsuits try to recoup their investment losses.

Read the letter to SEC Chairman Walter (PDF)

Congress Should Create Independent Entity To Audit Advisory Firms, Ex-SEC Chair Says
, Bloomberg/BNA, March 8, 2013

Grassley Statement at Oversight Hearing of the Department of Justice, Grassley.Senate.gov, March 6, 2013


More Blog Posts:

US Sentencing Commission is Open to Public Comment on Proposed Amendments that Could Impact Insider Trading Convictions, Institutional Investor Securities Blog, February 29, 2012

AARP, Investment Adviser Association, Among Groups Asking the SEC to Make Brokers Abide by 1940 Investment Advisers Act’s Fiduciary Duty, Stockbroker Fraud Blog, April 14, 2012