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Matthew C. Solomon has significant experience in complex and high-stakes civil and criminal matters, having served for 15 years with the U.S. Department of Justice and the U.S. Securities and Exchange Commission—including most recently as the SEC’s Chief Litigation Counsel.

On June 8, 2022, the SEC announced a notable settlement with national audit firm CohnReznick LLP, charging it with failure to uphold several professional standards during its 2017 audits of two public companies that had previously been sued by the SEC for accounting fraud.  In its order, the SEC specifically alleged that CohnReznick violated professional standards and contributed to materially misleading financial statements by, among other things, failing to exercise sufficient professional skepticism and accepting assertions from company management without sufficient supporting evidence.  The SEC fined CohnReznick $1.9 million, levied fines and suspensions against several of its audit partners, and imposed an independent consultant with a sweeping mandate to demand various audit-related and internal process reforms and veto new audit clients.  This action is consistent with the SEC’s repeated warnings that “gatekeepers” such as auditors are in the agency’s crosshairs.

Continue Reading SEC Imposes Penalties and Sweeping Independent Consultant on CohnReznick for Alleged Audit Failures in Case Underscoring SEC’s Focus on “Gatekeepers”

On June 7, 2022, the Securities and Exchange Commission announced that it had charged software company Synchronoss Technologies, Inc. and seven of its current and former employees in connection with an alleged long-running accounting fraud involving improper revenue recognition of more than $46 million across six quarters.   All of those implicated settled with the SEC and agreed to pay a range of penalties, except for the former CFO and controller, who will litigate against the SEC in New York federal court.  Synchronoss was ordered to pay a $12.5 million penalty.

Continue Reading SEC Accounting Enforcement Action Signals Heightened Focus on Individual Accountability and Puts Public Company Executives on Notice for Potential SOX 304 Reimbursement

On January 14, 2022, the United States District Court for the Northern District of California issued a decision in SEC v. Matthew Panuwat[1] validating the legal theory advanced by the Commission that trading in the securities of a competitor company could form the basis of an insider trading violation where the defendant learned that an acquisition of his employer was imminent.  In denying the defendant’s motion to dismiss the complaint, the court ruled that the SEC had sufficiently pled a claim, marking the first judicial decision concerning alleged insider trading in securities of a company based on material, nonpublic information (“MNPI”) about another company, a practice that has sometimes been referred to as “shadow trading.”   The court’s refusal to dismiss the SEC’s novel legal theory that trading on the basis of MNPI of one company to profit on a securities transaction involving a competitor constitutes actionable insider trading should be considered by companies and individuals as they assess trading decisions and policies.
Continue Reading SEC’s “Shadow Trading” Insider Trading Case Allowed to Proceed

2021 was a year of transition for white-collar criminal and regulatory enforcement. As courthouses reopened and trials resumed, newly-installed heads of law enforcement authorities looked to reset priorities and ramp up enforcement in the first year of the Biden administration. 
Continue Reading Priorities, Trends and Developments in Enforcement and Compliance

On September 2 and 3, 2021, the Securities and Exchange Commission (“SEC”) announced settlements with Pareteum Corporation (“Pareteum”) and Kraft Heinz Co.[1] (“KHC”) for accounting fraud following years of alleged accounting improprieties and financial restatements at both companies.  The underlying facts differed in significant ways, including with respect to the alleged involvement of senior executives, but both companies apparently received cooperation credit for their prompt and proactive remediation and cooperation with the SEC Division of Enforcement’s investigations.  The messaging in relation to the announcement of these cases and their timing, coming in the early days of new Enforcement Director Gurbir Grewal’s tenure, is instructive.  We expect the SEC to continue to focus on accounting fraud and to credit companies who provide cooperation in these challenging and resource-intensive investigations.  To see a meaningful increase in the frequency and nature of cooperation, the SEC would be well-served to provide even more explicit guidance on how cooperation results in improved settlement terms.  That said, these recent settlements are helpful in understanding the benefits of cooperation at this time.
Continue Reading Two Recent Settlements Highlight Heightened SEC Focus on Accounting Fraud and Potential Benefits of Cooperation

On April 29, 2021, the Securities and Exchange Commission (the “SEC”) announced settled charges against eight public companies that filed notifications of late filings on Form 12b-25 (more commonly known as “Form NT”) without disclosing in those filings a pending restatement or correction of financial statements.

These settlements are a reminder that filing a Form

On March 5, 2021, the Securities and Exchange Commission (“SEC”) filed a lawsuit in federal court against AT&T, Inc. (“AT&T”) for violating Regulation FD, and also charged three of AT&T’s Investor Relations executives with aiding and abetting this violation.[1]  Reg FD (which stands for “Fair Disclosure”) prohibits companies from selectively disclosing material nonpublic information to certain categories of individuals, including analysts and investors, and is intended to promote full and fair disclosure of such information in order to ensure that all investors have equal access to potential market-moving information.[2]

Continue Reading SEC Brings Rare Litigated Enforcement Action for Violation of Regulation FD

The tumultuous events of 2020, including the ongoing pandemic and the election of a new U.S. President, will have direct and lasting impacts on white-collar and regulatory enforcement in the years to come. As we enter 2021, we anticipate that white-collar and regulatory enforcement will be more active under the Biden administration, as policy priorities shift toward financial and corporate fraud, as well as ESG issues, environmental and social justice, more generally. At the same time, we expect the already-visible pandemic and recession-related enforcement trends to continue, with a sustained focus on financial statement and accounting fraud. Finally, we expect that the increased reliance on whistleblowers will continue (and potentially grow) in 2021.
Continue Reading Priorities, Trends and Developments in Enforcement and Compliance

On September 30, 2020, amidst a blizzard of cases filed at the end of the Securities and Exchange Commission’s fiscal year, the SEC announced a settlement with BGC Partners, Inc. (“BGC”) involving allegedly misleading disclosures concerning how it calculated a key non-GAAP financial measure (“NGFM”).[1]   This settlement is the latest in a string of enforcement actions relating to what the SEC views as improper uses of NGFMs.  In advance of year-end reporting, this action is a useful reminder to companies to carefully consider the SEC guidance and recent enforcement actions related to NGFMs.  At least 95% of all Fortune 500 companies publish NGFMs, and the SEC has indicated that it will be reviewing NGFMs with particular scrutiny this year-end in light of the challenges of reporting on performance during the COVID-19 pandemic.
Continue Reading SEC Brings Enforcement Action Against Global Brokerage Company, Finding False and Misleading Statements In Connection With Non-GAAP Financial Measures

On the eve of the U.S. presidential election last week, the SEC Enforcement Division released its annual report for fiscal year 2020 (the “Report”), providing an overview of the Division’s enforcement figures, developments, and areas of focus in what Director Stephanie Avakian described as “the most challenging year in recent memory.”[1]  This past year has marked, together with the longest shutdown in government history the year prior, a challenging but reasonably productive time for the SEC’s enforcement program.  Just as last year’s report highlighted the Division’s struggles during the fiscal shutdown, the final annual report of the Clayton-led SEC focuses on the significant disruption the COVID-19 pandemic has caused to the Division’s operations, investigations, and priorities, including the suspension of testimony for several months, establishment of a Coronavirus Steering Committee, and redirection of resources toward COVID-related fraud.  This time around, however, the Division could not avoid a drop-off in the number of enforcement cases, which seems attributable at least in part to the pandemic and its profound impact on the SEC’s operations.
Continue Reading From Government Shutdown to COVID-19: SEC Enforcement Division Releases Final Chapter of Jay Clayton-led SEC