"The Securities and Exchange Commission has received its share of criticism for not properly policing markets. But lost amid headlines Thursday was a damning indictment from inside the agency.
[Securities and Exchange Commissioner] Luis Aguilar wasn’t willing to go along with a settlement against Kevin Kyser, the former chief financial officer of Affiliated Computer Services.
Aguilar pointed out that... Kyser himself knew what ACS was doing, was responsible for false and misleading public filings, highlighted the misleading revenue growth in earnings releases and analyst calls, failed to ensure ACS adequately disclosed the significance of these calls, signed false certifications and received an inflated bonus.
But Kyser, a CPA, wasn’t charged with fraud, Aguilar lamented.
"Beyond this particular matter, I am concerned that the Commission is entering into a practice of accepting settlements without appropriately charging fraud and imposing Rule 102(e) suspensions against accountants in financial reporting and disclosure cases. I am also concerned that this reflects a lack of conviction to charge what the facts warrant and to bring appropriate remedies.
I am concerned that this case is emblematic of a broader trend at the Commission where fraud charges—particularly non-scienter fraud charges—are warranted, but instead are downgraded to books and records and internal control charges. This practice often results in individuals who willingly engaged in fraudulent misconduct retaining their ability to appear and practice before the Commission.
I fear that cases in the future will continue to be weak.”
"S.E.C. Commissioner Rebukes His Colleagues
The Securities and Exchange Commission is the regulator that is supposed to crack down on executives who put misleading and fraudulent numbers into their financial filings.
But Luis A. Aguilar, a commissioner at the S.E.C., said on Thursday that he was concerned that the agency’s stance in such cases might be weakening. Mr. Aguilar made his comments in a surprising dissenting statement that sharply criticized an enforcement action against two senior executives who worked for an information technology company called Affiliated Computer Services.
...Mr. Aguilar also said that the S.E.C.’s enforcement orders may sometimes be “purposely vague and/or incomplete, and written in a way so as to lead the public to conclude that no fraud had occurred.” This, he added, “muzzles my voice by not allowing any statement by me (including this dissent) to include a fulsome description of facts that support the view that the commission should have brought fraud charges.”
Mr. Aguilar also cited figures showing that the S.E.C. has been bringing fewer financial disclosure cases in recent years and securing fewer executive suspensions in such cases..."