September 10, 2003

Okay, the SEC's Reg FD enforcement proceedings are getting more serious - Schering-Plough paid a $1 million fine and the former CEO/Chair paid $50k himself (with injunctions levied against both). This is the first Reg FD settlement with an individual.

The facts appear straight-forward on their face, private meetings with analysts who then downgrade and sell immediately. An interesting aspect of the SEC's press release is that the company executives conveyed their selective disclosure through a "combination of spoken language, tone, emphasis, and demeanor."

Before the Senate Banking Committee yesterday, SEC Chair Donaldson testified that state regulators endanger enforcement of securities laws when they fail to coordinate cases with federal prosecutors or his agency. He specifically cited Oklahoma prosecutors who filed an action against WorldCom two weeks ago - and before he testified, Donaldson noted that he wished Elliott Spitzer had given the SEC more notice regarding his mutual fund investigation.

Our first survey on "Reporting Up/QLCCs" was quite successful with over 175 responses, so we urge everyone to participate in our new Quick Survey on Individual Director Evaluations.

Thanks to Warren de Wied of Fried Frank for his excellent (and lengthy) analysis of the Breeden report, which is now available on GreatGovernance.com.