Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

The first public company received credit for its cooperation as a result of the SEC’s policy with respect to cooperation in investigations and enforcement actions announced in January 2010.  The public company, Carter’s, Inc., entered into a non-prosecution agreement.

 The SEC charged a former Executive Vice President of Carter’s Inc. for engaging in financial fraud and insider trading. The SEC alleges that Joseph M. Elles’s misconduct caused an understatement of Carter’s expenses and a material overstatement of its net income in several financial reporting periods.

 The SEC also announced that it has entered a non-prosecution agreement with Carter’s under which the Atlanta-based company will not be charged with any violations of the federal securities laws relating to Elles’s unlawful conduct. The non-prosecution agreement reflects the relatively isolated nature of the unlawful conduct, Carter’s prompt and complete self-reporting of the misconduct to the SEC, its exemplary and extensive cooperation in the investigation, including undertaking a thorough and comprehensive internal investigation, and Carter’s extensive and substantial remedial actions.

 The SEC’s proposed whistleblower rules encourage employers to self report violations to the SEC.  Public companies should take into account the availability of the SEC policy for cooperation when considering when to self-report.  Unfortunately, at this time there is only a data base of one action  to use when making that assessment.

 Check frequently for updates on the Dodd-Frank Act and other important securities law matters.