Beware The SEC’s New Strict Enforcement

Dennis McCarthy  |

Here’s a warning to public company officers, directors and major shareholders: The SEC has taken a new, stricter approach to enforcing rules that many have considered less important or less risky to violate. Armed with new monitoring technology, the SEC is now aware of violations and is actively pursuing cases.

Shareholder Reporting Violations 

For example, it was no doubt an unwelcome surprise when, this September, the SEC charged 36 shareholders and companies for shareholder reporting failures under sections 13(d), 13(g) or 16(a) including insufficient or late filings.

The SEC has a new analytical tool which monitors filings and flags when filings are missing or late for any reason, including inadvertently missing the filing deadline. What was once an arduous task for the SEC to track has now been automated and become easy.

Audit Committee Chair Failures

Last Spring, the SEC charged two companies’ Audit Committee Chairs for failing to act on obvious red flags of fraudulent accounting and financial reporting. 

This is an example of enforcement of the SEC’s “gatekeeper” program designed to place greater responsibility on attorneys, accountants and board members to monitor and report questionable corporate activity.

False Certification by Company Executives

Finally, in July, the SEC charged the CEO and CFO of a public company with falsely certifying its financial statements.

The charge stems from an SEC review of the company procedures which revealed that company management misrepresented the state of its internal controls over financial reporting to its auditors, and not from a misstatement of financial results.

So consider it fair warning that the SEC now has the analytical tools and intends to enforce more strictly a wide range of violations by company executives, board members and large shareholders.

You don’t want to be the case highlighted in another of these articles. 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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