"The SEC Spoke" at a packed Ronald Reagan Building in Washington, D.C. on Friday and Saturday. Some highlights from Day 1:

--Chairman Donaldson delivered the opening remarks (full text available here). He stated that when he arrived in 2002, the SEC was "underfunded, understaffed, faced with an expanded workload, and reeling from criticism that it had not done enough to stop the corporate scandals of the previous few years." Although some people "questioned [his] sanity" in accepting the job, he viewed the Chairman position as a chance to make a difference by drawing on his many years of experience. He also was prompted to accept the position because of what he called his very strong and personal negative reaction to the erosion of standards in the corporate world. Mr. Donaldson stated that as Chairman, he has set out to "restore the SEC's credibility as the investors' watchdog. And that meant reforming how the SEC operates. We have undertaken comprehensive reviews of every SEC division - assessing current needs and resources, reviewing methodology, and installing performance measures."

The Chairman then gave a plug to the now-being-formed "Office of Risk Assessment," aka the "Pre-Crime Unit." He stated that the mission of the ORA is "to see over the hills and around the corners of problems that may be looming in the distance," consistent with his prior statement that ORA is supposed to "head off major problems before they occur."

[Random thought: Is a "Pre-Cog" position in ORA a good gig or bad gig? Can anyone really fault you even if you utterly fail to see over hills, stop problems before they occur or otherwise fail to foresee the future with regularity?

Supervisor: "Carton, have you foreseen any fraud this month?"
Carton: "Uh, no. No sir. I'm still thinking about it, though."
Supervisor: "OK then. Keep plugging away."]

--Linda Chatman Thomsen, Deputy Director of the Division of Enforcement, stated that in the last 12 months, the SEC has won 9 of its 11 trials in federal district court, and 21 out of 21 administrative proceedings.

--Thomas Newkirk, Associate Director of Division of Enforcement, stated that between July 2002 and the end of December 2003, the DOJ brought 300 criminal corporate fraud cases against 600 defendants, including 44 CEOs. He added that there are currently 350 open corporate fraud investigations involving 620 subjects.

--Mark K. Schonfeld, Associate Regional Director of the SEC's Northeast Regional Office, stated that while a "1+1" disgorgement and penalty (disgorgement plus a penalty equal to the amount of disgorgement) used to be the norm in insider trading settlements, such terms are now reserved for only the most cooperative of defendants.

Wednesday, February 25, 2004

2004 ISS Annual Conference Begins Today

The 2004 ISS Annual Conference begins today in Washington, D.C. Highlights will include a keynote address tomorrow by John Bogle of The Bogle Financial Markets Research Center.

Today, I will moderate a panel on securities litigation issues facing institutional investors entitled, "Securities Class Actions and Your Fiduciary Responsibility." Topics will include institutional participation as lead plaintiffs in securities class actions, the pros and cons of "opting out" of the class in order to pursue individual actions, and claim filing responsibilities and alternatives.

The panel consists of Jerome Birn of Wilson Sonsini Goodrich & Rosati; Alan Cleveland of Sheehan, Phinney, Bass and Green; and Douglas McKiege of Bernstein, Litowitz, Berger and Grossmann. I will try to post highlights from this panel and the rest of the conference on SLW.

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Tuesday, January 20, 2004

Report from the Third Annual Grant & Eisenhofer Institutional Investor Conference

Back from the Third Annual Grant & Eisenhofer Institutional Investor Conference, held this year in South Beach, Florida. This was a terrific conference made even better by the fact that the net gain in temperature on Friday as I arrived from D.C. was plus 55 degrees. And that was a very good thing. After bursting out of the baggage claim area to reacquaint myself with the large, yellow fireball in the sky (of which I had only distant, fading memories), I proceeded on to the conference.

Some quick highlights:

Elaine Buckberg, Ph.D., of the consulting firm NERA presented some initial findings concerning 2003 securities class action filings and settlements. She stated that:

--224 federal securities class actions (including 14 analyst cases) were filed in 2003, roughly inline with the post-PSLRA average of 212 cases.

--a public company's odds of being sued in a securities class action lawsuit in 2003 were 1.8%, up 11% from the 1.6 % chance in 1995 but down from 2.3% in 2002.

--the percentage of dismissed cases is down by 1/3 since the passage of SOX

--4 of the 7 largest securities class action settlements ever took place in 2003: WorldCom; Lucent; DaimlerChrysler; Oxford Health.

--following the passage of the PSLRA, the average settlement pre-SOX was $17.3 million; post-SOX, that average has climbed to $22.2 million.

Another interesting statistic was presented by panelist Mitchell Herr of Holland & Knight. Mr. Herr stated that according to statistics he has gathered, the number of officer and director bars imposed by the SEC has more than tripled since 2001, as follows:

2001--51
2002--126
2003: 170

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