David Kirkpatrick

August 9, 2010

SEC knocking at the door? Cooperate

Filed under: Business, Politics — Tags: , , , , , , — David Kirkpatrick @ 11:18 am

Well, unless you’re certain you’ll be found innocent of any charges the SEC is bringing to bear. If you’re eventually going to get nailed, cooperating will garner a lower penalty.

From the link:

A new study finds that it may pay — at least in dollar terms — to help the SEC by sharing results of internal investigations and keeping the public informed when something has gone awry. Rebecca Files, an accounting professor at the University of Texas at Dallas, claims that while cooperating with the SEC increases a company’s likelihood of getting sanctioned, being both cooperative and forthcoming in information shared with investors can result in lower penalties. “It’s just like going to the cops and turning yourself in,” she says. “You’ll still have to pay some cost for your actions, but the penalty will be significantly reduced.”

Files based her findings on a study of 1,249 restatements made between 1997 and 2005, 10% of which resulted in a sanction against the company or its managers. She drew her conclusions on how forthcoming companies were about their problems in press releases and 8-Ks, as well as how quickly they came forward after a problematic reporting period. Since the SEC’s dealings with these companies occur behind closed doors, she could not know how fully cooperative they were in any investigation.