Within the arsenal of remedies that may be sought by the Securities and Exchange Commission in response to alleged violations of the Securities Act of 1933 and the Securities Exchange Act of 1934 is an order barring an individual from acting as an officer or director of any registrant or required filer. Recently, in SEC v. Bankosky, 2013 WL 1955809 (2d Cir. May 14, 2013), the SEC attempted, unsuccessfully, to have the U.S. Court of Appeals for the Second Circuit equate the standards and analyses for the issuance of a bar order with those for issuance of an injunction. Had the court accepted the SEC’s position, the issuance of a bar order, although a distinct statutory remedy with a specified, albeit ambiguous predicate, would become paired with the issuance of an injunction, at least in this circuit.
The officer and director bar order, if granted, may be conditional or unconditional, permanent or of limited duration. Although injunctive relief, disgorgement and civil penalties are often the matters of primary and immediate concern to individuals being investigated by the SEC, the long- term consequences of the issuance of an officer and director bar order should not be disregarded. While the stigma of an injunction may influence an existing or prospective employee against retention or initial employment, a bar order is a mandatory preclusion, at least as far as positions in which the defendant would act as an officer.
