Accounting

Strategies for an Individual Involved an SEC Financial Reporting Investigation (Portfolio 5505)

  • Portfolio 5505, Strategies for an Individual Involved in an SEC Financial Reporting Investigation (Accounting Policy and Practice Series), discusses the problems and issues confronting an officer, director, or employee of a public company under SEC investigation for potential financial reporting violations.

Description

BNA Tax and Accounting Portfolio 5505, Strategies for an Individual Involved in an SEC Financial Reporting Investigation (Accounting Policy and Practice Series), discusses the problems and issues confronting an officer, director, or employee of a public company under SEC investigation for potential financial reporting violations. The paramount consideration for any such individual is to focus on protecting his or her personal interests. Amidst the confusion and uncertainty of an investigation, the company will likely concentrate on protecting its corporate interests. As part of its efforts to defend itself, the company may subordinate the welfare of individual officers, directors, and employees to its corporate interests at a time when events could unfold quickly and significantly affect the fortunes of these individuals. The company’s priorities and actions may be appropriate and well-intentioned from its standpoint, but officers, directors, and employees could find that their personal interests conflict with those of the company. Thus, individuals in a company under SEC investigation should look out for themselves.

The Portfolio discusses how the interests of individuals may differ from those of the company, and analyzes ways for individuals to endeavor to protect themselves. In particular, the Portfolio emphasizes the individual’s need for a personal attorney who has the independence to offer undivided loyalty. The Portfolio discusses the investigative process as an individual would likely experience it. In particular, it analyzes whether or not to provide documentation to the government and testify or, conversely, assert the Fifth Amendment right against self-incrimination, and legal privileges that might allow an individual to reduce the amount of information he or she provides to the government. The possibility of becoming a cooperating witness for the government is also discussed, as it can significantly improve the outcome of the investigation for an individual. The Portfolio covers theories of liability, sanctions, and the settlement process. Finally, considerations for evaluating the ultimate question whether to litigate or settle are presented.

This Portfolio covers an enormous range of topics within the body of the federal securities laws, and the citation of cases and other authorities herein is illustrative, not comprehensive. This Portfolio is intended first and foremost to be a practical aide to the officers, directors, and employees of public companies, and not a traditional legal treatise. In the interest of making the issues discussed herein accessible to nonlawyers, this Portfolio is written in the vernacular, and gives preference to comprehensibility for the layperson over technical legal precision. A reader seeking a more detailed and technical discussion of relevant issues should refer to Accounting Policy and Practice Portfolios that address particular bodies of law or accounting rules. The author was personally involved as an SEC attorney in certain of the cases cited in this Portfolio. His comments herein about those cases are based upon matters within the public record.

This Portfolio may be cited as BNA Tax and Accounting Portfolio 5505, Wang, Strategies for an Individual Involved in an SEC Financial Reporting Investigation (Accounting Policy and Practice Series).

Table of Contents

I. Introduction
II. Starting Off on the Right Foot
III. The Dynamics of an SEC Financial Reporting Investigation
IV. The Investigative Process
V. The End Game: Theories of Liability, Potential Sanctions, the Wells Process, and Settlement
VI. Planning Points: Strategic Considerations
VII. CONCLUSION

wang-leonard-2015
Leonard Wang
Tax Management Portfolio Authors
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