SEC Settlements Declined in 2009 For Second Straight Year

December 8, 2009

The number of Securities and Exchange Commission settlements declined for the second consecutive fiscal year in 2009, with 626 defendants, compared to 673 in FY 2008, according to the global consultng firm, NERA Economic Consulting, in its fiscal year-end SEC Settlements Trends report.

The 2009 fiscal year-end figures represent the lowest annual number of settling defendants since the Sarbanes-Oxley Act was implemented in 2002.

Monetary payments were a component of 58.6% of company settlements and 58.9% of individual settlements for FY 2009. For companies, the average settlement more than doubled to $10.7 million, compared to $4.7 million in the previous year. The median company settlement was $1.0 million, the same as in FY 2008.

The divergence between doubling average company settlements and unchanged median settlements is explained by three settlements over $100 million: Siemens’ $350 million alleged Foreign Corrupt Practices Act (FCPA) settlement, UBS’s $200 million settlement for allegedly facilitating customer tax evasion, and the $177 million alleged FCPA violation settlement for Halliburton and its subsidiary KBR.

Trends in Misstatement Cases

The latest SEC Settlements Trends report analyzes all post-SOX SEC settlements relating to alleged public company misstatements, providing context for the SEC’s $33 million proposed settlement with Bank of America being struck down in federal court.

NERA authors found that in the post-SOX era, individuals have been more likely than the companies themselves to be targeted by the SEC in misstatement cases. Since the passage of SOX to the end of FY 2009, the SEC has reached settlements in cases relating to the alleged misstatements of 353 public companies. Of these cases, the SEC has settled only with the company 62 times, compared to 99 cases where the SEC has settled only with individual directors or employees. In the remaining 192 cases, the SEC has settled with both the company and individuals.

NERA Economic Consulting’s Securities Litigation Trends

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