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Misstatement Settlements

Misstatements and omissions are among the allegations most frequently brought by the SEC and account for the majority of cases brought against publicly-traded companies. The number of settlements involving company misstatements rebounded strongly in 2007, after three years of declines (see below). Both the number of settling companies and individuals increased. The 151 settling defendants in 2007 nearly equaled the 2003 post-SOX high. 2008 is on pace to set a new post-SOX record for the number of misstatement settlements, but, as with the trend in overall settlements, the growth is coming in individual settlements. Settlements with companies are on pace to total 30, which would represent a decrease from 2007.


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Misstatement cases against public companies also account for many of the SEC's largest settlements. After reaching a high of $50 million in 2006, the median company settlement value fell to $26.5 million in 2007 and $12 million in the first three quarters of 2008 (see below). This drop had been anticipated by the press because, as of January 1, 2007, SEC staff have been required to obtain Commission approval for penalty amounts prior to beginning settlement negotiations with public companies. The median settlement amounts for individuals are not shown in the graph below, but have ranged from a low of $75,000 in 2003 to a high of $225,000 in 2002.

It is not only US companies that face regulatory risk regarding misstatements. Of the 197 total post-SOX settlements with company defendants in misstatement cases, 18 (or 9.1%) involve foreign issuers.




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