SEC Levies $7.65 Million Penalty Even Though Bank Self-Reported
A large bank agreed to pay a $7.65 Million penalty in connection with regulatory capital overstatements that it self-identified and reported. According to the SEC, the firm’s tax department discovered that the firm failed to write down certain securities acquired in a 2008 acquisition. Consequently, the firm had inadvertently overstated its regulatory net capital in 10-Q filings. The firm self-reported the issues to the SEC, who still levied the fine for failing to maintain an adequate system of internal controls and books and records. Andrew J. Ceresney, Director of the SEC’s Division of Enforcement, explained that the respondent “self-reported its regulatory capital overstatements, remediated the issues quickly, and cooperated in our investigation” and said that the penalty “reflects credit for that cooperation.”
OUR TAKE: Poor internal controls and inadequate books and records can have significant consequences even if not discovered by the SEC. In this case, the firm had no choice but to amend its 10-Qs, leading to the self-reporting and the enforcement action.