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Remediation and Cooperation Pay Off in SEC Settlement

The SEC often encourages self-reporting, cooperation, and remediation in speeches and policy statements. In a settled enforcement action announced today, the Commission made clear just how valuable those efforts can be, allowing a company to settle accounting controls and disclosure violations with no financial penalty whatsoever.

According to the SEC’s announcement, from 2012 to early 2016, the former CEO and CFO of Provectus Biopharmaceuticals, Inc. obtained millions of dollars from the company by using insufficient or non-existent expense documentation, causing the company to materially understate their compensation in annual reports and proxy statements. While the SEC order directs Provectus to cease and desist from committing any further accounting controls and disclosure violations, it notably imposes no financial penalty on the company. The SEC’s order states that it took into consideration Provectus’ prompt remedial acts and cooperation with the Commission, including (i) the retention of independent counsel and a forensic accounting firm to conduct an internal investigation; (ii) the replacement of the CFO and CEO accused of wrongdoing; (iii) the decision to hold the former executives accountable through legal process; (iv) the creation of new finance positions; (v) the hiring new auditing and bookkeeping firms; and (vi) the revamping of  internal control measures related to expense reimbursement. The SEC also credits the company for voluntarily sharing the findings of its internal investigation with the Commission, saving the Enforcement staff both time and resources.

The Provectus settlement is a good reminder for companies that prompt, thorough, and independent inquiry into potential wrongdoing, swift remedial action, and transparency with the Commission can substantially mitigate their SEC enforcement exposure in the end.

© Copyright 2018 Squire Patton Boggs (US) LLP

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About this Author

Coates Lear, Squire Patton Boggs Law Firm, Goverment Inquires Attorney
Principal

Coates Lear specializes in assisting companies and individuals involved in government inquiries and enforcement proceedings, especially investigations and actions by the US Securities and Exchange Commission (SEC). Coates also advises on compliance matters, with a focus on asset management, and represents clients in complex litigation.

303-894-6141
attorney

Elizabeth Weil Shaw assists clients primarily with government enforcement actions and inquiries, as well as internal investigations and compliance reviews. Liz has analyzed matters involving investigations by the US Securities and Exchange Commission, Department of Justice and State Attorneys General. She is a contributor to the firm's Anticorruption Blog.

303-830-6129