June 27, 2012 / 4:01 AM / in 7 years

U.S. SEC settlements with individuals on the rise

* Pace of SEC settlements with individuals up in FY12 -NERA

* SEC could see 20 pct hike in settlements by fiscal year-end

* Insider-trading cases helping drive up the numbers

* Overall number of settlements also up in first half FY12

* JOBS Act could lower enforcement actions -NERA

By Sarah N. Lynch

WASHINGTON, June 27 (Reuters) - Aggressive efforts to combat insider trading a re helping U.S. securities regulators boost the number of settlements they reach with individual defendants, a new report has found.

The U.S. Securities and Exchange Commission has settled 286 cases with individuals in the first half of its 2012 fiscal year, a pace that puts the agency on track for a 20 percent jump in individual settlements over fiscal 2011, an analysis by NERA Economic Consulting said.

The report could help the SEC in its effort to be seen as a tough enforcement agency, especially after failing to catch convicted Ponzi swindlers Bernard Madoff and Allen Stanford.

NERA’s report found that the increase in individual settlements is primarily being driven by insider trading cases, including a $92.81 million settlement with the now-imprisoned Galleon Group founder Raj Rajaratnam.

The report was written by NERA Senior Vice President Elaine Buckberg and Vice President James Overdahl, a former SEC chief economist. Th e N ERA has re leased S EC settlement trend reports since July 2002. The reports come out twice a year.

This latest report found that the increased number of individual settlements is the driving force behind an overall increase in settlements, with 379 defendants in the first half of fiscal 2012, which began on Oct. 1.

That puts the SEC on pace for a 13 percent jump over the p revious fiscal year and the busiest year for SEC settlements since 2005.

NERA also found that the median individual settlement value has extended a three-year upward trend, and is now $190,000.


The largest settlement of any kind this fiscal year was a $285 million accord last October with Citigroup Inc. U.S. District Judge Jed Rakoff in Manhattan later rejected that settlement; the SEC and Citigroup have appealed his decision.

Another large corporate settlement was a $90.8 million agreement with Hungary’s Magyar Telekom to resolve corruption charges.

The median settlement with companies, however, fell to $800,000 i n the first half of this fiscal year f rom $1.5 million in fiscal 2011.

NERA cautioned, however, that new legislation enacted in April could curb settlement activity.

The JOBS Act, which scales back certain securities regulations to help startups raise capital and eventually go public, could affect enforcement involving unregistered securities offerings. NERA said 15 percent of SEC settlements in the last three years related to such offerings.

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