By Sarah N. Lynch
WASHINGTON, Jan 14 (Reuters) - U.S. securities regulators
reached 714 settlements with defendants in civil cases in the
2012 fiscal year - the highest number since 2007, a report
released on Monday showed.
The biannual report by NERA Economic Consulting found that
the overall number of Securities and Exchange Commission
settlements increased by 6.6 percent in fiscal 2012 over fiscal
During that same period, the SEC also saw a big jump in
settlements with individuals, which rose 14 percent to 537 from
473, marking the highest level since 2005.
Part of the increase in settlements stems from the SEC's
focus on insider-trading cases, which reached a record 118 in
fiscal 2012 and included the high-profile $92.8 million civil
penalty against Galleon hedge fund manager Raj Rajaratnam.
NERA's latest report on SEC settlement trends comes just a
few days after Enforcement Director Robert Khuzami announced he
plans to depart the agency after a nearly four-year tenure.
Khuzami was hired by former SEC Chairman Mary Schapiro to
help polish the agency's image after its embarrassment over
missing Bernard Madoff's massive Ponzi scheme.
NERA's latest report also found that during Schapiro's
tenure from 2009 through 2012, the median settlement with
individuals increased by nearly 40 percent from $110,000 to
That could help the SEC bolster its case that it has stepped
up enforcement against individuals, rather than focusing on
penalties against companies. Some critics have argued that fines
against companies often punish shareholders who were already
harmed by the bad behavior.
Although the report cautions that it may be too early to
identify "signature trends" during the Schapiro era, it finds
that the "apparent shift in settlement activity and settlement
amounts with individuals" appears to be "consistent with a focus
on individual accountability" by the SEC.
NERA publishes a report twice a year that analyzes SEC
The most recent report was released on the day that Khuzami
and SEC deputy enforcement director George Canellos publicly
defended their division's record.
In a posting on the National Law Journal's website, Khuzami
and Canellos take aim at a Dec. 3 article in the same
publication from Columbia University Law Professor John Coffee.
Coffee used prior NERA data on settlements to argue that
there is a "disturbingly persistent pattern" in which the SEC
"rarely sues individual defendants at large financial
institutions" and "frequently loses" when it does sue.
Khuzami and Canellos question how Coffee interpreted the
data and rebutted the claim that the SEC rarely sues
"His definition of 'senior executive' appears ... limited,
since he makes no mention of the SEC's actions against
high-ranking managers at such firms as Credit Suisse and Bear
Stearns for misconduct related to the credit crisis," they
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