July 4, 2022

Volume XII, Number 185

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July 01, 2022

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SEC Shamelessly Targets Late Filers

Yesterday, the Securities and Exchange Commission announced “charges” against 28 officers, directors, or major shareholders for failing to report timely ownership and transactions as required by Section 16(a) and Section 13 of the Securities and Exchange Act of 1934.  These individuals were ordered pay thousands of dollars in fines and to cease and desist from future violations.  The SEC also charged six companies for contributing to these delinquent filings.  With no hint of irony, the announcement warned:

The reporting requirements in the federal securities laws are not mere suggestions, they are legal obligations that must be obeyed.

Apparently, the SEC believes that this principle does not apply to itself.  The Dodd-Frank Act is a federal securities law that imposed numerous deadlines on the SEC.  These deadlines were not “mere suggestions”, they were legal obligations that the SEC was required to obey.  Yet, the SEC did not.  For example, the SEC failed to adopt resource extraction rules within the statutorily mandated 270 days.  After the SEC missed this deadline by over a year, Oxfam America filed suit to force the SEC to comply. Eventually, the SEC adopted final rules on August 22, 2012 – only 600 days late!  Yet, no cease and desist orders were issued and no fines were assessed against the Commissioners.  This was not an isolated example of tardiness.  According to this report, the SEC has missed over 30% of the rule making deadlines imposed by the Dodd-Frank Act.  Perhaps Congress should change the SEC’s name to “Securities and Exchange Cunctator”.

While I may not like many of the rules that Congress ordered the SEC to adopt, the SEC’s failure to comply with the law is consequential.  Allowing an agency to violate the law with impunity gives the agency a veto power over Congress.  When any agency violates the law, the agency forfeits the moral authority to enforce the law.  There should not be one law for the regulated and no law for the regulator.

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume IV, Number 254
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

949-851-5428
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