SEC Mulling Tougher Stance On Corporate Fraudsters

by Glen Shapiro, LawAndTax-News.com, New York

24 January 2005

According to a report from the BusinessWeek news service last week, the US Securities and Exchange Commission (SEC) is considering following the lead of Massachusetts Secretary of the Commonwealth, William F. Galvin, who has called on regulators to force firms to admit wrongdoing in corporate fraud cases rather than allow them to dodge the issue.

Mr Galvin has taken this tough line with several companies, including mutual fund firms Franklin Templeton Investments and Putnam Investments, and argues that obliging firms to admit corporate misconduct is a punishment which cannot be shrugged off by the institutions in question as easily as the monetary fines which are often imposed.

BusinessWeek revealed that the SEC is currently examining whether it should adopt this tougher stance, and official talks on the matter are expected to take place in March.

However, such a proposal is likely to create an uproar within the business community, as an admission of liability in a government probe could open the door for large numbers of private lawsuits to be brought against the firms in question.

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