Content area
Full Text
Approximately 76 percent of the Securities and Exchange Commission’s Accounting and Auditing Enforcement Releases reported during the quarter ended June 30 are for Rule 102(e) sanctions against individuals — a quarterly percentage that reflects a record high for at least the prior five-year period.
Evaluating and understanding the facts and trends within the Rule 102(e) population can provide valuable insights for defense counsel and people involved in SEC enforcement investigations, including:
What types of sanctions are most often administered?
Who receives sanctions?
When negotiating sanctions, are certain terms and provisions under the rules more favorable than others?
For background, under Rule 102(e), the SEC has the power to suspend and disbar professionals from appearing or practicing before the commission on behalf of public registrants. Of note, there are three types of Rule 102(e) actions, simply denoted by section as (1), (2) and (3).
The first category, Rule 102(e)(1) actions, involves censuring a person or denying that person, temporarily or permanently, the “privilege of appearing or practicing” before the SEC based on findings that the individual:
does not possess the requisite qualifications to represent others;
is lacking in character or integrity or has engaged in unethical or improper professional conduct; or
has willfully violated, or willfully aided and abetted the violation of, any provision of the federal securities laws or the rules and regulations thereunder.
Importantly, with respect to those licensed to practice as accountants, “improper professional conduct” under Rule 102(e)(1)(ii) means:
Intentional or knowing conduct, including reckless conduct, that results in a violation of applicable professional standards.
Either of the following two types of negligent conduct:
A single instance of highly unreasonable conduct that results in a violation...