Stock Lawyer SEC Enforcement and Litigation 1

Question 1

What are the two main types of enforcement proceedings the SEC can bring against securities law violators?

Accepted Answer

Civil injunctive actions in federal court and administrative proceedings before the SEC

Answer

The SEC can bring civil injunctive actions in federal district court seeking injunctions, disgorgement, and civil penalties, or administrative proceedings before an SEC administrative law judge.

Question 2

What is a 'Wells Notice' in SEC enforcement?

Accepted Answer

A formal notification from the SEC staff that they intend to recommend enforcement action and giving the recipient an opportunity to respond

Answer

A Wells Notice is a formal notice from SEC enforcement staff informing a subject that they intend to recommend an enforcement action, giving the recipient a chance to submit a 'Wells Submission' explaining why charges should not be brought.

Question 3

What remedy is 'disgorgement' in SEC enforcement actions?

Accepted Answer

An equitable remedy requiring a defendant to return ill-gotten gains from securities violations

Answer

Disgorgement is an equitable remedy that requires defendants to return profits gained through securities violations to compensate harmed investors, and was significantly reformed in Liu v. SEC (2020) to be limited to net profits.

Question 4

Under the Dodd-Frank Act, what financial incentive does the SEC's whistleblower program offer?

Accepted Answer

Awards of 10-30% of sanctions collected when the SEC obtains more than $1 million based on original information

Answer

The SEC's whistleblower program awards between 10% and 30% of total monetary sanctions collected when the SEC obtains sanctions exceeding $1 million based on original information voluntarily provided by the whistleblower.

Question 5

What is an 'Officer and Director Bar' in SEC enforcement?

Accepted Answer

An SEC remedy prohibiting a person from serving as an officer or director of a public company following a securities violation

Answer

An officer and director bar is an SEC remedy, available in civil proceedings, that prohibits a violator from serving as an officer or director of any SEC-reporting public company, typically imposed for serious misconduct.

Stock Lawyer Practice Test

Stock Lawyer Practice Test

Stock Lawyer SEC Enforcement and Litigation 1