LexisNexis Corporate & Securities Law Community 2011 Top 50 Blogs

Bon mots

"You can observe a lot just by watching." Yogi Berra

"We do not distain to borrow wit or wisdom from any man who is capable of lending us either." Henry Fielding, Tom Jones

"In our complex society the accountant's certificate and the lawyer's opinion can be instruments for inflicting pecuniary loss more potent than the chisel or the crowbar." United States v. Benjamin, 328 F.2d 854, 862 (2d Cir. 1964)

Questions The New Commissioners Should Consider Asking

Now that three new SEC commissioners are poised to take their seats I would like to make a few modest suggestions for questions they should ask.

When considering enforcement recommendations please keep in mind the insight of Cass Sunstein concerning the extremism resulting from group decision making.  In my opinion this manifests itself in an SEC enforcement cultural bias that rewards staff for recommending that many defendants be charged with many offenses.  Call it the "law school exam syndrome" -  how many possible violations can be squeezed out of the facts. 

Therefore, I would suggest you ask the following questions about every enforcement recommendation you consider:

1) What is the specific evidence that each individual proposed defendant who is charged with a scienter based offense in fact acted with scienter and is this evidence persuasive?

2)  How will the defense counter that evidence?

3)  If the defendant did not personally profit from his alleged misconduct, why is a scienter based charge appropriate?

4) Were there any significant disagreements among the staff concerning charging decisions and case design?

The enforcement staff recommendations to the Commission are reviewed ad nauseam.  The life of a recommendation memo to you can be measured in many months.  You as Commissioners have the ability to influence this process and speed it up - you of course know that "justice delayed is justice denied."  So please consider asking these questions about every enforcement recommendation:

5) What were the dates of the first and last Wells submissions?
6) What was the date of the first draft of the recommendation memo submitted by the staff to the first level supervisor?

7) In the case of regional office recommendation memos - when was it first submitted to headquarters?

This blog focuses on SEC administrative proceeding opinions.  As you may know, the courts of appeals have not been particularly kind the the Commission in recent years.  The author of this blog believes that administrative forum is a valuable one that should not be overlooked by the Commission.  Please consider asking these questions:

8) How long did the process of drafting the proposed opinion take?

9) Were there any significant or troubling issues raised by this opinion?

10) Is oral argument really necessary or is it simply a tactic being used to foster delay?

11) Why is this matter not appropriate for summary disposition?

The securities laws are founded on a philosophy of full disclosure.  Yet the Commission itself fails to make such disclosures.  Therefore, I propose two final questions for you to pose:

12)  Why are only a few selected SEC appellate briefs published on the Commission web site and shouldn't they all be available?

13)  In administrative proceedings, why are briefs of the parties on major motions and post-trial and appellate briefs not posted on the Commission's web site?