Mary Jo White and Andrew J. Ceresney ()
The need to hold individuals accountable for securities violations has sparked a tremendous amount of dialogue in recent years, particularly in the wake of the financial crisis and the Enron-era accounting scandals. Regulators and prosecutors, legislators, and industry leaders have focused on the issue and the need to hold accountable those individuals who were involved in a company’s misconduct. For example, in September 2015, then-Deputy Attorney General Sally Yates issued a memorandum stating that “one of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.”1 Our take on the Yates Memo is that it was an effort by the Department of Justice (DOJ) to broadly refocus attention on individual liability, although most DOJ employees were likely fully focused on this issue long before the memo’s release. Some members of Congress have gone even further, suggesting a potential expansion of individual liability. For example, during Jay Clayton’s confirmation hearing as Chairman of the U.S. Securities and Exchange Commission (SEC), one senator asked Clayton whether he would endorse a regime under which corporate executives would be subject to a strict liability standard for misconduct that takes place under their watch.2 Clayton stated that he had not given this issue much thought, but that “[s]trict liability without mens rea … [is] a big step.”3 Clayton’s views are consistent with the traditional view in U.S. jurisprudence that guilt should be personal.
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