Article: Court Rejects SEC's Imposition of Civil Penalties against Directors in Early Test of Sarbanes-Oxley.

In one of the first appellate court decisions to address the SEC's ability to impose civil penalties against directors in administrative proceedings under the Sarbanes-Oxley Act of 2002, on November 15, 2005, the U.S. District Court for the District of Columbia criticized the SEC for being "arbitrary and capricious." In an SEC administrative proceeding against The Rockies Fund, Inc. and its directors for engaging in market manipulation and making false statements on SEC filings, the SEC imposed "the harshest available" civil penalties without proof that the directors' conduct "created a significant risk of substantial losses to other persons." Without such proof, the ...

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