SEC Focuses on “Gatekeepers” in Recent Enforcement Actions

23 April 2014
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  • SEC Commissioners have recently articulated an Enforcement priority related to pursuing more cases against “deficient gatekeepers” who should be “serving as the neighborhood watch, but who fail to do their jobs.”
  • Two recent SEC enforcement actions highlight the Commission’s focus. In both actions, the SEC brought charges against directors who serve as chairs of their respective audit committee for “fail[ing] to perform [their] gatekeeper function in the face of massive red flags.”
  • Directors need to ensure that sound corporate governance practices are followed, provide robust oversight of the company’s activities, and actively investigate red flags to ensure that they are fulfilling their gatekeeping function with adequate diligence.