Enron, WorldCom, Adelphia and other recent securities fraud investigations in the US have featured a bewildering array of actors with roles in regulating, suing or charging those alleged to be responsible. It is understandable if all but the most devoted observers are confused. This article is a guide to the players – federal, state, local, self-regulatory and private – who enforce securities laws in the US in one way or another. We will describe who they are, what they do and how they work with, and sometimes against, each other.
The players
The Securities and Exchange Commission
The Securities and Exchange Commission (SEC) is an independent federal agency created to enforce the federal securities laws and regulate securities markets. The Division of Enforcement is the agency’s principal investigative arm and can have the power to subpoena documents and witnesses. After an investigation by the Division of Enforcement, the SEC may bring charges before its own US administrative law judges or civil suits in federal district court alleging violations of the federal securities laws. More serious cases are brought in district court. Companies and individuals may be charged with violations ranging from fraud (including insider trading and misrepresentations of a company’s financial affairs) to more technical violations of registration provisions and other rules. Possible penalties include fines, disgorgement of gains, injunctions and orders against future wrongdoing and suspensions or bars from service as officers of public companies. The SEC does not have criminal jurisdiction and generally refers cases it believes to be criminal to federal prosecutors.
