By Carrie Johnson
Washington Post Staff Writer
Friday, March 9, 2007; D03
The nation's top securities watchdog yesterday mounted a forceful defense of the government's ongoing crackdown on corporate fraud, amid industry complaints that authorities are overreaching in their drive to police misconduct on Wall Street.
Linda Chatman Thomsen, the enforcement chief at the Securities and Exchange Commission, told an assembly of corporate lawyers that businesses should stop "blaming everyone else for [their] issues" and instead take steps to prevent fraud and investor abuse inside their own operations.
"Greed and money continue to be powerful, powerful motivators that aren't going away," Thomsen said, according to a copy of remarks she delivered to the Corporate Counsel Institute at Georgetown University in the District. "We've got plenty to do, and we're doing it."
The vigorous defense comes as the U.S. Chamber of Commerce prepares to issue a report Wednesday calling for less-burdensome regulation and more-targeted enforcement of U.S. companies to protect the competitiveness of the markets. The Chamber report follows two similar studies: one issued by a panel formed with support from Treasury Secretary Henry M. Paulson Jr. and another sponsored by Sen. Charles E. Schumer (D-N.Y.) and Michael Bloomberg, the Republican mayor of New York.
In recent weeks, securities enforcers have filed charges against brokers and managers for taking part in a six-year-long insider-trading ring and for tampering with the dates they awarded stock options to themselves and favored employees.
Yesterday, Thomsen sounded alarms about another area of interest: whether executives are taking advantage of a legal safe harbor to sell their stock and profit before their companies report bad news. In 2000, the SEC passed a rule that allows corporate officials to develop a formal trading plan that sets out prearranged dates when they can sell shares without facing insider-trading allegations. But academic studies suggest that the rule may be a cover for improper activity, Thomsen said.
"We're looking at this hard," she said. "If executives are in fact trading on inside information and using a plan for cover, they should expect the 'safe harbor' to provide no defense."