- The Washington Times - Wednesday, January 4, 2006


The U.S. Securities and Exchange Commission’s five rule makers yesterday agreed on how to penalize public companies, seeking to end a debate on whether big corporate fines hurt shareholders too much.

Republican Commissioners Paul Atkins and Cynthia Glassman have battled their Democratic counterparts over whether such penalties deter wrongdoing. They have argued that the SEC should focus on punishing the people who break laws, because shareholders bear the burden of corporate penalties.

SEC Chairman Christopher Cox, a Republican who took over the agency in August, said the guidelines released yesterday offer “objective standards” to make enforcement penalties more predictable and consistent. His predecessor, William Donaldson, sided with the SEC’s two Democrats on penalties of $300 million for Time Warner Inc. and $100 million at HealthSouth Corp.

“It ought not to be a matter of what a judge had for breakfast that a penalty is higher or lower,” Mr. Cox said. “Rather, there should be a principle involved, and it should be a transparent process.”

The SEC’s guidelines say that fines against corporations “are an essential part of an aggressive and comprehensive program” to enforce securities laws. Fines are most appropriate when a company financially benefits from a violation and when a fine can help compensate shareholders hurt by the misconduct, the SEC said.

“The overwhelming sense is there is a need for some standard or barometer” for fines, said William McLucas, a former SEC enforcement chief who now defends companies as co-head of the securities practice at Wilmer Cutler Pickering Hale and Dorr in Washington.



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