Risk & Compliance

SEC Cracks Down on Stonewalling

After taking a tough stance with Amerco, commission fines Banc of America Securities $10 million.
Stephen TaubMarch 11, 2004

The Securities and Exchange Commission has apparently adopted a zero-tolerance policy for companies that don’t cooperate with its investigations.

Actions against two companies this week appeared to reveal the trend. As part of a settled enforcement action announced yesterday, for example, the commission fined Banc of America Securities $10 million — the largest fine ever levied by the SEC against a company for “willfully” failing to produce documents in an SEC probe, according to Bloomberg.

The SEC had charged that the financial giant was not responsive to the agency’s requests while it was conducting a probe. BAS “repeatedly failed to promptly furnish documents requested by the staff, provided misinformation concerning the availability and production status of such documents, and engaged in dilatory tactics that delayed the investigation,” the commission charged.

The commission’s actions stemmed from BAS’s alleged violation of record-keeping and access requirements of the securities laws. The violations allegedly occurred while the commission was looking into whether the firm traded securities in companies prior to issuing research on those companies.

“Today’s action makes clear that we will not tolerate unreasonable delay in responding to our inquiries and will act aggressively to protect the integrity of the Commission’s investigative processes,” said Stephen Cutler, director of the commission’s Division of Enforcement.

Earlier this week, in a matter that bears some similarity to the BAS action, the SEC applied to a U.S. District Court for an order to enforce investigative subpoenas served on Amerco, which it says hasn’t cooperated with the regulatory agency’s investigation into possible violations of federal securities laws.

In its action against BAS, which neither admitted to or denied the SEC’s findings, the commission charged that the company was tardy in producing E-mail, compliance reviews, and compliance and supervision records concerning the personal trading activities of a former senior employee. “When questioned about certain production failures and delays, BAS provided the staff with misinformation concerning the availability and the production status of such documents, and engaged in dilatory tactics that delayed the investigation,” the commission charged.

BAS spokesperson Shirley Norton told Reuters that the company had taken the issue seriously and put in place a number of measures designed to improve its ability to respond “to this and other regulatory inquiries.” She said the company believes the problems addressed by the SEC in the settlement are isolated.