On January 19, 2006, in the clear blue Florida sky, an Atlas V rocketed off from Cape Canaveral carrying a small spacecraft called New Horizons. This mission, planned by NASA (that is the National Aeronautics and Space Administration, not the other NASAA, the North American Securities Administrators Association), exited the Earth at more than 36,000 miles per hour for a long term “voyage to visit the planet Pluto and then beyond.” That same month, the Securities and Exchange Commission launched something of similar importance, at least in my view, namely its Statement Concerning Financial Penalties, also known as the “Corporate Penalty Statement.”
Announced in conjunction with two settled accounting fraud cases, one with a $50 million civil penalty and the other with no penalty, the Corporate Penalty Statement was issued in a unanimous decision of 5 to 0 under the leadership of Chairman Cox, after over 40 hours of meetings reconciling differing views amongst the Commissioners. The Statement is a concise document with a specific mission, which is to provide an analytical framework so when the Commission imposes a civil penalty on a corporate issuer, it can explain why, and that explanation should rest on what Congress authorized and why it authorized it. As a measure approved by Commission vote, the Statement should have a similar stature to other regulatory guidance provided by the Commission, whether in amicus briefs, adjudicatory opinions, administrative orders, interpretive releases, or otherwise.
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