July 21, 2011

SEC Commissioners Reject Enforcement Staff Proposal to Settle Clawback Case

According to this Washington Post article yesterday, the SEC’s Commissioners have disagreed with its Enforcement Staff to settle the CSK Auto clawback case because the penalty amount was too low. It’s relatively rare that the Commission disagrees with its Enforcement Staff – but certainly not unheard of – but it is rare that a closed Commission meeting outcome like this is made public.

The SEC’s Enforcement Process: How Does a Commissioner Dissent?

There are various steps in the SEC’s Enforcement process that requires blessing by the SEC’s Commissioners. That approval either takes place behind closed doors at a closed Commission meeting or ad seriatim. Last week, the Washington Post ran this article about Commissioner Aguilar dissenting in a settlement – the article notes that only two dissents in an enforcement action have been posted since ’04.

A public dissent by a Commissioner certainly is unusual, but it’s not unprecedented as noted in the article. Because this settlement was in the form of an administrative proceeding, there was an opportunity for Commissioner Aguilar to have a public airing. Otherwise (i.e., with a federal court action), there’s no public outlet to note a Commissioner’s dissent – it is merely recorded by the SEC’s Secretary in the minutes of the closed Commission meeting. But sometimes the press does get leaked information somehow – you may recall the news reports last year that the 2 Republican Commissioners dissented from the SEC-Goldman Sachs settlement involving the ABACUS CDO…

Next Tuesday: SEC to Adopt Institutional Investment Manager Vote Reporting Rules and More

As noted in ISS’s Blog, the SEC will hold an open Commission meeting on Tuesday to adopt rules requiring institutional investment managers to disclose their voting records; rules replacing credit rating references with alternative criteria and rules establishing a large trader reporting system. The SEC will also consider re-proposing rules relating to shelf-eligibility for asset-backed securities.

– Broc Romanek