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ARTICLE · 12 JANUARY 2006

Securities Litigation: SEC Sets Framework for Imposing Financial Penalties on Corporations

Morrison Foerster
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On January 4, the U.S. Securities and Exchange Commission articulated the factors it says it considers when weighing financial penalties against corporations settling enforcement actions. The SEC issued the statement in conjunction with its announcement of two settled enforcement actions.

United StatesFinance and Banking
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On January 4, the U.S. Securities and Exchange Commission articulated the factors it says it considers when weighing financial penalties against corporations settling enforcement actions. The SEC issued the statement in conjunction with its announcement of two settled enforcement actions. In one, SEC v. McAfee, Inc., No. 06-009 PJH (N.D. Cal.), Lit. Rel. 19520 (Jan. 4, 2006), the defendant corporation agreed to a $50 million penalty. In the other, In the Matter of Applix, Inc., Sec. Act. Rel. No. 8651 (Jan. 4, 2006), the respondent corporation will not pay a penalty. In each case, the company stipulated to a finding that it had committed securities fraud.

The SEC included a lengthy defense of both its authority to impose financial penalties on corporations and the wisdom of doing so. This was an attempt to respond to recent criticism that significant financial penalties inappropriately punish current shareholders for violations caused by others.

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