SEC Sets Forth Criteria for Monetary Penalties on Stock Issuers

The Securities and Exchange Commission announced yesterday a set of criteria to be used in determining the nature of sanctions against stock issuers which violate SEC rules. The SEC stated that a 1990 law nicknamed the "Remedies Act", along with Sarbanes-Oxley, were two major sources of criteria. Listed as primary issues were: direct benefit to the corporation of the violation and the extent to which a penalty would help OR injure shareholders who were victimized by the violation. A number of secondary issues included the following: the importance of deterring a specific practice, the level of injury to victims, breadth of violation complicity, intent of violators, difficulty in detecting the violation, presence or absence of remedial steps once the violation is found and willingness of management to cooperate in the investigation of the violation.

The steps listed appear reasonable and will hopefully provide a consistent approach to sanctioning violations. Most importantly, the policy itself will act as a deterrent toward security violations.