On Sept. 10, the U.S. Securities and Exchange Commission (SEC) brought an unprecedented 28 charges against corporate insiders for a combined monetary penalty of $2.6 million for failure to timely file Section 16 and Section 13(d) and Section 13(g) reports. This so-called “enforcement sweep” suggests that the SEC has changed its approach to combating insider-trading violations and is, for the first time, using untimely filings of required disclosure reports as proxies for insider-trading violations. In the past, the SEC used its resources to attack a few heavyweight offenders in the hopes of deterring insider trading through harsh sentences. By aiming for quantity over quality, the SEC has demonstrated a greater willingness to pursue suspected violations of varying degrees.
The penalties sought in the September enforcement actions pale in comparison to the long prison sentences that the SEC has sought in the past. Since 2003, six violators of insider-trading rules have each received prison sentences ranging between seven and 12 years. By contrast, the charges filed by the SEC brought Sept. 10 sought monetary fines against each alleged violator of less than $375,000.
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