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SEC Plans to Aggressively Pursue Financial Fraud in 2014

 The Securities and Exchange Commission (SEC) reported that it filed only 68 financial fraud enforcement actions, the fewest during the past decade, in 2013, but the SEC has taken measures that could reverse that trend in 2014

The SEC announced in July 2013 that its Division of Enforcement would be expanding its technology and analytical capacity to focus on high-risk areas of the market.  Specifically, the SEC formed the Financial Reporting and Audit Task Force, a unit dedicated to detecting fraudulent or improper financial reporting, armed with a new Accounting Quality Model (“AQM” or “Robocop”).  The Task Force will collaborate with the SEC’s Office of the Chief Accountant, the Division of Corporation Finance and the Division of Economic and Risk Analysis to identifying earnings management and other financial-statement reporting and disclosure violations.  

“A strong enforcement program helps produce financial markets that operate with integrity and transparency, and reassures investors that they can invest with confidence,” said Mary Jo White, Chair of the SEC.  “I am incredibly proud of the dedicated and talented women and men of the Enforcement Division.  Our results show that we are prepared to tackle the breadth and complexity of today’s securities markets.”

According to a press release issued by the SEC on December 17, 2013, the Enforcement Division began 2014 with a significant pipeline, initiating 908 investigations in 2013 (a 13% increase) and obtained 574 formal orders of investigation (a 20% increase).  The press release also reported that the agency issued a record $3.4 billion in sanctions during the 12 months ended September 2013. 

The SEC’s co-director of the Division of Enforcement, George S. Canellos, stated that the SEC is “focused on addressing wrongdoing in all corners of the financial industry.  Going forward, we will continue to be aggressive but fair in our pursuit of those who violate the securities laws.”


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