Federal Regulatory Agencies
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SEC Issues Order Involving Tupperware Brands
WASHINGTON, Sept. 30 -- The Securities and Exchange Commission issued the following order (No. 3-21180) on Sept. 29, 2022:* * *
In the Matter of Tupperware Brands Corporation, Respondent.
ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER
I.
The Securities and Exchange Commission ("Commission") deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"), against Tupperware ... Show Full Article WASHINGTON, Sept. 30 -- The Securities and Exchange Commission issued the following order (No. 3-21180) on Sept. 29, 2022: * * * In the Matter of Tupperware Brands Corporation, Respondent. ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER I. The Securities and Exchange Commission ("Commission") deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act"), against TupperwareBrands Corporation ("Tupperware" or "Respondent").
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over it and the subject matter of these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order ("Order"), as set forth below.
III.
On the basis of this Order and Respondent's Offer, the Commission finds that:
Summary
1. These proceedings arise out of failures by Respondent to devise and maintain a sufficient system of internal accounting controls and to maintain accurate books and records from at least 2016 through 2020 (the "Relevant Period").
2. Specifically, Tupperware's failures relate to its House of Fuller Mexico reporting unit ("Fuller Mexico"), which Tupperware acquired as part of the Fuller Cosmetics beauty products business. Instead of fully integrating Fuller Mexico post-acquisition, and implementing appropriate policies and procedures, Tupperware retained certain legacy policies and practices, failing to recognize the risk that these policies and practices may not adequately address that unit's direct sales model and, over time, lagging financial performance. As a result, Fuller Mexico's management was able to override controls and inaccurately record financial results from at least 2016 through 2020 by: improperly increasing sales via the shipment of unordered products, without purchase orders ("Non-PO Sales"); and improperly reserving for various other expenses at Fuller Mexico.
3. During the Relevant Period, Fuller Mexico increasingly shipped Non-PO Sales to its independent sales representatives (known as "Fullerettes"). At certain points, Fuller Mexico sent more product via Non-PO Sales than the Fullerettes could reasonably sell, and a number of Fuller Mexico's Non-PO Sales were made at the end of financial reporting periods.
4. As Non-PO Sales from Fuller Mexico increased over time, so did product returns. Tupperware failed to adequately reserve for the increased returns, as Fuller Mexico continued to apply a more lenient legacy practice for determining reserves arising from Fuller Mexico sales. Furthermore, Tupperware continued to rely on Fuller Mexico's legacy information technology system and failed to respond to red flags indicating that Fuller Mexico was improperly using NonPO Sales to attempt to meet its financial targets. Fuller Mexico's management also overrode existing internal accounting controls by failing to book various required reserves in an attempt to show better results for the unit.
5. In August 2021, as a result of the activities at Fuller Mexico, Tupperware disclosed in its amended annual report on Form 10-K/A that, from 2016 through the first quarter of 2020, it had misstated its net sales, accounts receivable, inventories, and accrued liabilities in its annual and interim financial statements. Tupperware disclosed that approximately $5.2 million of reserves, including those related to Non-PO Sales, were erroneously recorded and should have been reflected in prior periods. Additionally, Tupperware also disclosed that approximately $2.4 million of other accruals were erroneously excluded from prior periods.
6. As a result of the conduct described herein, the Commission finds that Tupperware violated Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act.
Respondent
7. Tupperware Brands Corporation, incorporated in Delaware with its principal place of business in Orlando, Florida, is a consumer products company. Tupperware's common stock is registered with the Commission pursuant to Section 12(b) of the Exchange Act and trades on the New York Stock Exchange under the symbol "TUP."
Facts
8. In 2005, Tupperware acquired the Fuller Cosmetics beauty products and other direct selling businesses from Sara Lee Corporation. Following the acquisition, Tupperware did not fully integrate these businesses into its existing policies and procedures. Instead, Tupperware allowed Fuller Mexico to retain certain legacy policies and procedures, as well as legacy sales practices.
9. In particular, Tupperware continued to utilize Non-PO Sales at Fuller Mexico. Historically, Fuller Mexico's Non-PO Sales were automatic shipments several times a year of new or promotional items, like a new lipstick shade. Fuller Mexico added the items to Fullerettes' orders, typically at a discount or a special price, with the option to be returned. As a result, Fuller Mexico calculated reserves for returns for Non-PO Sales as part of its sales returns allowance.
10. Until the fourth quarter of 2019, Tupperware used a legacy practice from Fuller Mexico to estimate the returns reserve based on the average returns that occurred over the prior twelve-month period. By contrast, Tupperware's general practice at the time for other units would have estimated this reserve based on the average returns that occurred over the prior six-month period, resulting in a higher, more conservative return reserve than Fuller Mexico's legacy practice.
11. Fuller Mexico's business performance waned in the years following its acquisition. As Fuller Mexico's sales failed to meet targets between 2017 and 2019, Tupperware management at the Worldwide and Latin America regional levels heightened pressure on Fuller Mexico to meet unrealistic sales expectations.
12. In response, Fuller Mexico increased its use of, and reliance upon, Non-PO Sales, through escalation of the frequency, type, and number of products shipped. This included the initiation of certain Non-PO Sales at the end of financial reporting periods. At least as early as 2018, the number of Non-PO Sales began to increase and shifted towards products with a higher profit margin, such as perfume, and away from the intended purpose of providing new or promotional products at a discount. Additionally, beginning in at least mid-2018, red flags should have made Tupperware aware of Fuller Mexico's misuse of, and failure to properly account for, Non-PO Sales.
13. As part of its increasing use of Non-PO Sales, Fuller Mexico employed several other strategies in an attempt to meet targets. One example of these aggressive strategies was referred to as a "reactivation order," or "suggested order," whereby Fullerette supervisors identified Fullerettes who were close to becoming inactive in Fuller Mexico's system, and used unsolicited "reactivation orders" to try to reengage those Fullerettes in the business and prevent the Fullerettes from becoming inactive in Fuller Mexico's system. Once a Fullerette was inactive, Fuller Mexico's policy required bad debt for that Fullerette's sales to be reserved at a higher rate.
14. Another strategy was known as "director sampling" or the "red button," in which Fuller Mexico divisional directors who were at risk of not meeting sales targets could add Non-PO Sales to Fullerettes' orders. The Non-PO Sales here included products that were not offered at a discount. Fuller Mexico formalized this practice in 2018 as part of an IT update, with a software tool that made it more efficient for divisional directors to add unordered products to existing Fullerette orders in their division, once approved at higher levels within Fuller Mexico.
15. Following an inquiry into Fuller Mexico's trial balances for the first quarter of 2019, Tupperware's internal audit team, as part of a regularly scheduled financial audit of Fuller Mexico in the third quarter of 2019, conducted a review of certain Non-PO Sales practices at Fuller Mexico in response to elevated returns. This review led to the commencement in October 2019 of an internal investigation into Fuller Mexico's sales order and returns process. Ultimately, Tupperware management concluded an adjustment was required for calculating Fuller Mexico's returns reserve, but incorrectly concluded the adjustment was a change in accounting estimate, instead of a correction of an accounting error.
16. Under Generally Accepted Accounting Principles ("GAAP"), a change in accounting estimate results from new information and should be accounted for prospectively; by contrast, an accounting error may result from mistakes in the application of GAAP or oversight or misuse of facts that existed at the time the financial statements were prepared and may require restatement of previously-issued financial statements.
17. In the third quarter of 2019, Tupperware adjusted its reserves by $10 million, as reflected in Tupperware's quarterly report, filed with the Commission in November 2019. Tupperware initially attributed the change in accounting estimate determination for calculating Fuller Mexico's returns reserve and other related reserves, including accounts receivable and inventory, to current trends and external factors, such as slower consumer spending. Tupperware maintained that it was a change based on new information, and therefore did not represent an accounting error.
18. A subsequent investigation uncovered, however, (i) unrealistic sales expectations from Tupperware's Latin America regional leadership, (ii) sales strategies designed by Fuller management to help meet sales targets, along with promotions or incentives to make the product more attractive to the Fullerettes, and (iii) Fullerettes received more product than they could realistically sell.
19. As a result of this investigation, Tupperware terminated several members of Fuller Mexico and regional management for "loss of confidence." In late 2019, Tupperware stopped the use of "director sampling" and directed the phase-out of Non-PO Sales at Fuller Mexico, which was completed in early 2020.
20. After further concerns were raised internally about Fuller Mexico, Tupperware conducted an additional internal investigation, and determined that Fuller Mexico failed to book various other expenses in order to show better performance. To address these expenses, Tupperware then recorded an adjustment in the fourth quarter of 2019 of approximately $9 million, of which approximately $2.4 million related to prior periods.
21. In February 2020, Tupperware disclosed it would delay the filing of its 2019 annual report on Form 10-K as it probed "the accounting for accounts payable and accrued liabilities at its Fuller Mexico beauty business." Tupperware made a number of other announcements, including that it estimated total 2019 impairments related to Fuller Mexico of approximately $31 million.
22. Ultimately, Tupperware filed its 2019 annual report with the Commission on March 12, 2020 and represented that the investigation into Fuller Mexico was completed, that the impact of out of period adjustments was immaterial, that the system of internal control over financial reporting ("ICFR") was effective, and that there were no material weaknesses in ICFR.
23. In 2021, Tupperware conducted an additional investigation and determined that it had not accounted for all forms of Non-PO Sales at Fuller Mexico, and that certain amounts related to Non-PO Sales were accounting errors, rather than merely changes in estimates. Tupperware again concluded again in 2021 that the conduct was not material to the financial statements.
24. Of the original $10 million in adjustments to reserves booked in the third quarter of 2019, Tupperware ultimately determined in 2021 that $5.2 million was an out-of-period error, comprised of understated reserves and overstated inventory. Tupperware simultaneously concluded that revenue associated with the Non-PO Sales had not been recorded in accordance with GAAP.
25. In August 2021, Tupperware filed an amended annual report for 2020, disclosing the existence of a Commission investigation and restating its report on ICFR to identify a new material weakness relating to the override of internal accounting controls by Fuller Mexico management. The errors identified for Non-PO Sales and other expenses in Tupperware's 2020 amended annual report include adjustments for 2016 through 2020, as follows:
* * *
Table
[Link to table at bottom of document.]
* * *
26. Tupperware acknowledged that historically, it was unable to track the volume of Fuller Mexico's Non-PO Sales in a sufficient level of detail and, as a result, was unable to monitor the use of this type of sale, which should have been limited in nature. Information systems in place at Fuller Mexico were not configured to sufficiently identify, summarize, and report Non-PO Sales.
27. As a result of the conduct described above, Respondent violated Section 13(b)(2)(A) of the Exchange Act, which requires reporting companies to make and keep books, records, and accounts which, in reasonable detail, accurately and fairly reflect their transactions and dispositions of their assets.
28. Lastly, as a result of the conduct described above, Respondent violated Section 13(b)(2)(B) of the Exchange Act, which requires all reporting companies to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondent Tupperware's Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 21C of the Exchange Act, Respondent Tupperware cease and desist from committing or causing any violations and any future violations of Sections 13(b)(2)(A) and 13(b)(2)(B) of the Exchange Act.
B. Respondent Tupperware shall, within 10 days of the entry of this Order, pay a civil money penalty in the amount of $900,000.00 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. Sec. 3717.
Payment must be made in one of the following ways:
(1) Respondent may transmit payment electronically to the Commission, which will provide detailed ACH transfer/Fedwire instructions upon request;
(2) Respondent may make direct payment from a bank account via Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or
(3) Respondent may pay by certified check, bank cashier's check, or United States postal money order, made payable to the Securities and Exchange Commission and hand-delivered or mailed to:
Enterprise Services Center
Accounts Receivable Branch
HQ Bldg., Room 181, AMZ-341
6500 South MacArthur Boulevard
Oklahoma City, OK 73169
Payments by check or money order must be accompanied by a cover letter identifying Tupperware Brands Corporation as a Respondent in these proceedings, and the file number of these proceedings; a copy of the cover letter and check or money order must be sent to Stacy Bogert, Associate Director, Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549-5012.
C. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated as penalties paid to the government for all purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of compensatory damages by the amount of any part of Respondent's payment of a civil penalty in this action ("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed in this proceeding. For purposes of this paragraph, a "Related Investor Action" means a private damages action brought against Respondent by or on behalf of one or more investors based on substantially the same facts as alleged in the Order instituted by the Commission in this proceeding.
By the Commission.
Vanessa A. Countryman, Secretary
* * *
Original text here: https://www.sec.gov/litigation/admin/2022/34-95943.pdf
SEC Issues Order Involving Deloitte Touche Tohmatsu Certified Public Accountants
WASHINGTON, Sept. 30 -- The Securities and Exchange Commission issued the following order (No. 3-21178) on Sept. 29, 2022:* * *
In the Matter of DELOITTE TOUCHE TOHMATSU CERTIFIED PUBLIC ACCOUNTANTS, LLP Respondent.
ORDER INSTITUTING PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTIONS 4C AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICE, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER
I.
The Securities and Exchange Commission ("Commission") deems it appropriate that public administrative ... Show Full Article WASHINGTON, Sept. 30 -- The Securities and Exchange Commission issued the following order (No. 3-21178) on Sept. 29, 2022: * * * In the Matter of DELOITTE TOUCHE TOHMATSU CERTIFIED PUBLIC ACCOUNTANTS, LLP Respondent. ORDER INSTITUTING PUBLIC ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTIONS 4C AND 21C OF THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 102(e) OF THE COMMISSION'S RULES OF PRACTICE, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER I. The Securities and Exchange Commission ("Commission") deems it appropriate that public administrativeand cease-and-desist proceedings be, and hereby are, instituted against Deloitte Touche Tohmatsu Certified Public Accountants, LLP ("Deloitte-China" or "Respondent") pursuant to Sections 4C/1 and 21C of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 102(e)(1)(ii) and 102(e)(1)(iii) of the Commission's Rules of Practice./2
II.
In anticipation of the institution of these proceedings, Respondent has submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over it and the subject matter of these proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Public Administrative and Cease-and-Desist Proceedings Pursuant to Sections 4C and 21C of the Securities Exchange Act of 1934 and Rule 102(e) of the Commission's Rules of Practice, Making Findings, and Imposing Remedial Sanctions and a Cease-and-Desist Order ("Order"), as set forth below.
III.
On the basis of this Order and Respondent's Offer, the Commission finds/3 that:
SUMMARY
1. This matter involves failures to comply with fundamental U.S. auditing requirements by Deloitte-China audit personnel. In failing to perform certain basic tasks required by professional standards, Deloitte-China audit personnel failed to meet their obligations to their clients, as well as to investors, whose confidence in the integrity of public company audits is vital to the proper functioning of our capital markets.
2. An integral component of public company audits is inspecting and assessing the support for entries in clients' general ledgers to ensure those transactions were appropriately recorded. Completing this work is essential for an auditor to credibly opine on whether clients' financial statements fairly present, in all material respects, the clients' financial position and whether their internal control over financial reporting (ICFR) is effective.
3. In numerous instances, however, Deloitte-China audit personnel failed to perform audit procedures as required. This occurred in two ways.
4. First, engagement teams improperly concluded that certain client account balances and transactions were appropriately recorded without obtaining, or in some cases documenting that they obtained, supporting audit evidence. Deloitte-China audit personnel were required to document the work they performed to review the support for their clients' balances and transactions. This documentation would show that the engagement teams had conducted the necessary testing. In various audits, engagement teams asked their clients to complete this required documentation instead. This created the appearance that the Deloitte-China audit personnel had conducted the necessary testing when there was no evidence in the audit file that they had in fact done so.
5. Second, Deloitte-China audit personnel on certain audits failed to select and test samples properly. When sampling, auditors are required to do so using their own professional judgment. Deloitte-China audit personnel on these audits failed in their responsibility to select these samples. Instead, they asked the clients to select samples for testing. This fundamentally flawed practice defeated the purpose of audit sampling by creating the risk that clients could strategically choose only supported samples, thereby impairing the reliability of the testing.
6. And on certain audits, Deloitte-China audit personnel asked clients both to select samples of balances and transactions for testing and to prepare documentation purporting to support the required testing of those samples. The inclusion of that documentation in the audit workpapers created the appearance that the engagement teams had inspected and assessed the supporting evidence for those items when the audit file did not evidence that they had in fact done so.
7. Deloitte-China engagement partners and senior members of the impacted audit engagement teams failed to appropriately supervise the audit personnel who engaged in these inappropriate practices. The improper audit procedures described above demonstrate deficiencies in Deloitte-China's system of quality control over PCAOB engagements to provide reasonable assurance that the work performed by engagement personnel meets applicable U.S. professional standards.
8. Deloitte-China conducted an investigation that identified the audit failures described in this Order in multiple engagements that it reviewed. Of the engagements included in that review, Deloitte-China found the deficiencies described in this Order in nine component audits conducted for Deloitte-U.S. and in three audits of foreign private issuers for which Deloitte-China was the principal auditor.
9. These practices violated numerous elementary auditing standards of the Public Company Accounting Oversight Board ("PCAOB") and created a significant threat to U.S. investors, who rely on the opinions of independent auditors in making investment decisions./4 Deloitte & Touche LLP, the U.S.-based audit firm that engaged Deloitte-China to audit its clients' Chinese operations, relied on these deficient "component audits" in issuing its audit opinions. Deloitte-China is also the principal independent auditor for various foreign private issuers whose securities are registered on U.S. exchanges and who include Deloitte-China's audit opinions in their filings with the Commission. In all the impacted audit engagements, Deloitte-China incorrectly asserted that it had complied with PCAOB standards when it had not, threatening the reliability of the resulting audit opinions./5
RESPONDENT
10. Deloitte Touche Tohmatsu Certified Public Accountants, LLP ("Deloitte- China") is an accounting firm registered in Shanghai, China. Referred to in the People's Republic of China as "Deloitte Hua Yong," Deloitte-China is an affiliate of a member of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee ("Deloitte-Global") and part of the Deloitte network of firms. Deloitte-China is registered with the PCAOB. Among other things, Deloitte-China provides audit services upon which Deloitte & Touche LLP ("Deloitte-U.S.") relies in connection with the audits of certain U.S. issuers that conduct business in China and is the independent auditor to various foreign private issuers whose securities are registered on U.S. exchanges ("FPIs").
FACTS
Deloitte-China's Role in the Audits of U.S. Registrants
11. Deloitte-U.S. is the independent auditor for various U.S. issuers that conduct business in China. For some of these clients, Deloitte-U.S. has concluded that it is necessary to audit the clients' operations in China in order to issue its audit opinions. Deloitte-U.S. engages Deloitte-China to conduct this audit work. In doing so, Deloitte-U.S. instructs Deloitte-China on the audit scope and procedures to be performed.
12. Deloitte-U.S. expressly requires Deloitte-China to perform this work in accordance with PCAOB standards. This is because Deloitte-U.S. relies on the results of these "component audits" to opine on whether its clients' financial statements are fairly presented in all material respects in accordance with U.S. Generally Accepted Accounting Principles and, where applicable, whether its clients' ICFR is effective.
13. Separately, Deloitte-China is the principal independent auditor for various FPIs whose securities are listed on U.S. exchanges. In this role, Deloitte-China assumes responsibility for the entire audit and issues its own audit opinions on the FPIs' financial statements and, when applicable, on the effectiveness of the FPIs' ICFR. Deloitte-China is required to perform these audits in accordance with PCAOB standards. These FPIs file Deloitte-China's audit opinions with their annual reports on Form 20-F.
14. In both its component audits and its audits of FPIs, Deloitte-China asserts that it has conducted its testing in accordance with PCAOB standards. As described below, for multiple U.S. issuers and FPIs, these assertions were not accurate.
Deloitte-China's Deficient Audit Procedures
15. Among other things, PCAOB standards require auditors to exercise due professional care and skepticism in conducting their audit work,/6 obtain sufficient appropriate evidence to support their audit opinions,/7 and prepare appropriate audit documentation to support the work performed./8 When auditors select samples of account balances and transactions to test, PCAOB standards require them to select those samples using their own independent professional judgment and in a way that the sample can be expected to be representative of the population as a whole (i.e. without any bias)./9 Auditors should/10 also comply with professional standards relating to supervision, and audit firms must establish and maintain appropriate systems of quality control./11
16. To assess the propriety of entries in clients' general ledgers, Deloitte-China audit personnel were required to inspect and assess supporting evidence for those entries. In numerous audits, however, there is no evidence in the audit workpapers that Deloitte-China did so. Indeed, during Deloitte-China's investigation of this matter, some audit personnel acknowledged that they did not review the supporting documentation.
17. Instead, Deloitte-China audit personnel asked clients to complete documentation that the engagement teams were required to prepare to show they had inspected and assessed the support for the general ledger entries. Engagement teams included this documentation in the firm's workpapers as though it had been prepared by Deloitte-China personnel.
18. Based on the information provided by its impacted clients, these engagement teams concluded that the clients' balances and transactions for the relevant accounts were not materially misstated when there is no reliable evidence in the audit workpapers that the engagement teams knew whether those balances were materially misstated or not.
19. In addition, Deloitte-China audit personnel violated the PCAOB standard that requires auditors to select audit samples using their own independent professional judgment. As is customary in PCAOB audits, Deloitte-China often selects and tests samples of client account balances and transactions, rather than testing all items within the relevant populations. This is consistent with PCAOB standards. However, on certain impacted audits, rather than using the firm's independent professional judgment to select samples, Deloitte-China audit personnel asked employees of the companies they were auditing to select the samples to be tested.
20. This fundamentally flawed audit practice defeated the very purpose of sample testing because it created a risk that clients could avoid selection of account balances and transactions that may have been improperly recorded, and instead select samples the clients believed to be supported.
21. On certain audits, Deloitte-China audit personnel violated PCAOB standards in both ways: they asked client employees (i) to select samples of balances and transactions for testing, and (ii) to complete the documentation the audit teams were required to prepare to show they had performed the required tests.
22. These practices undermined the purpose of an independent audit and threatened the reliability of the resulting audit opinions.
23. The failures of Deloitte-China audit personnel on impacted audits to comply with PCAOB standards involved multiple audit areas, and involved the testing of various accounts on clients' balance sheets and income statements, as well as clients' ICFR, including their control for ensuring compliance with the Foreign Corrupt Practices Act.
24. In these impacted audits, Deloitte-China's senior engagement team members failed to properly supervise the conduct of junior audit personnel. Senior audit staff failed to properly evaluate whether the audit work was actually performed, and whether the firm had evidence sufficient to provide reasonable assurance for its audit conclusions.
25. Deloitte-China audit personnel engaged in these improper practices in both component audits it conducted for Deloitte-U.S., as well as in audits of FPIs for which DeloitteChina was the principal auditor.
26. Deloitte-China's quality control policies and procedures did not provide reasonable assurance that its audits were conducted in accordance with PCAOB standards as demonstrated by the improper practices described above. For example, Deloitte-China did not have in place sufficient policies and procedures to ensure that audits were adequately staffed with professionals who were properly trained in PCAOB standards, and that engagement teams had sufficient resources to complete the audit work they were required to do in the time frames demanded of them. The failure to establish and maintain adequate policies and procedures in such fundamental areas left Deloitte-China without reasonable assurance that its audits were being conducted in accordance with PCAOB standards.
Example of Deloitte-China's Deficient Audit Procedures on a Component Audit
27. In connection with its fiscal year 2018 audit of a U.S. issuer (Client A), Deloitte-U.S. instructed Deloitte-China to test certain account balances at Client A's China business. Deloitte-U.S. also instructed Deloitte-China to test Client A's ICFR in China. Deloitte-U.S. instructed Deloitte-China to conduct this testing in accordance with PCAOB standards, and Deloitte-China agreed to do so.
28. In this component audit alone, Deloitte-China audit personnel asked Client A employees on at least twenty-one separate occasions to complete audit procedures that DeloitteChina was itself obligated to perform. This involved eighteen different accounts of Client A, including testing for sales; cash and cash equivalents; accounts receivable; inventory; accounts payable; cost of sales; and selling, general and administrative expenses.
29. For example, in January 2019, Deloitte-China's Auditor-in-Charge/12 for this engagement emailed an excel spreadsheet to Client A in connection with the firm's testing of fixed assets, asking the client to provide detailed information about fixed asset sales and purchases. The spreadsheet included instructions to provide the voucher numbers, invoice numbers and disposal dates of three samples - which Deloitte-China had not selected - of fixed assets that Client A no longer held. The spreadsheet also included instructions to provide certain detailed information regarding fixed asset purchases. One week later, Client A returned the spreadsheet to Deloitte-China with samples the client had selected and the requested information regarding three fixed asset disposals and purchases.
30. There is no evidence, however, that anyone on the Deloitte-China engagement team assessed whether any of the information that Client A provided in the spreadsheet was accurate. Nevertheless, the final workpapers related to the audit work included this information from Client A.
31. The improper conduct on this engagement involved both junior and senior audit staff. Supervisory members of the audit team - including audit managers and the Auditor-in-Charge - were copied on some of the improper requests. Although the managers claimed they expected the junior staff to review the supporting documents, neither the managers nor anyone else on the engagement properly evaluated whether the required audit work had, in fact, been performed, and whether the firm had support for its audit conclusions. The failure of senior engagement team members to properly supervise junior auditors' work in this example is representative of Deloitte-China's approach in the deficient engagements.
32. The Auditor-in-Charge confirmed that staff sent spreadsheets for clients to complete without performing the required audit procedures themselves. She attributed this improper practice to tight deadlines and insufficient staff for an audit of that size. She believed managers were aware and had approved of the practice. However, neither the managers nor the Auditor-in-Charge raised these issues to the engagement partner.
33. Deloitte-China issued a "clearance memorandum" to Deloitte-U.S. in February 2019. The clearance memorandum incorrectly asserted that Deloitte-China had conducted its testing in accordance with PCAOB standards despite the improper audit procedures described above./13
Example of Deloitte-China's Deficient Audit Procedures on a FPI Audit
34. Deloitte-China was engaged as the principal auditor to perform the fiscal year 2018 audit of both the financial statements and ICFR of a China-based FPI (Client B). In connection with this audit, Deloitte-China failed to conduct required audit procedures on at least eight occasions across twelve audit areas.
35. For example, Deloitte-China's audit plan required the engagement team to test a sample of large bank transactions as part of the firm's testing of significant non-recurring items. In October 2018, a Deloitte-China Senior/14 on the engagement team sent several Client B employees a list of outstanding items required in connection with the audit, including a blank spreadsheet called "Q3 large bank transaction[s]," which was intended to document the firm's work to test a sample of those transactions. The October 2018 email was copied to three additional members of the engagement team, including the Auditor-in-Charge and another Deloitte-China Senior.
36. The Deloitte-China Senior asked the Client B employees to complete the spreadsheet by selecting their own sample of bank transactions over five million Chinese Yuan Renminbi, and then, for each transaction they selected, filling in various data fields, including bank name, transaction date, and credit or debit amount.
37. After Deloitte-China sent additional outstanding item lists with the same blank spreadsheet attached, in November 2018 a Client B employee sent an email to a member of the Deloitte-China engagement team attaching a completed copy of the spreadsheet that included fifteen large bank transactions and related information in the previously blank data fields in the spreadsheet.
38. There is no evidence in the audit workpapers, however, that anyone on the Deloitte-China engagement team ever obtained or reviewed the source documents supporting the information Client B provided, or otherwise assessed whether that information supported the entries.
39. The fifteen large bank transactions selected by Client B were used in the final Deloitte-China work papers.
40. As with the audit of Client A described above, a Manager on the audit and the Auditor-in-Charge explained the use of the deficient audit procedures by stating that the engagement team did not have sufficient resources to complete the audit properly. The Auditorin-Charge admitted that the engagement team's conduct was inappropriate, and impaired the integrity of the testing. The supervisory personnel on the audit failed to properly evaluate whether the required audit work had, in fact, been performed, and whether the firm had support for its audit conclusions.
41. Despite these and other audit failings, Deloitte-China issued an audit report for Client B incorrectly attesting that it had conducted this audit in accordance with PCAOB standards despite the improper audit procedures described above./15
VIOLATIONS
42. AS 1015 (Due Professional Care in the Performance of Work) requires auditors to conduct their audit work with reasonable care and diligence, and to exercise professional skepticism -- an attitude that includes a questioning mind and a critical assessment of audit evidence. Deloitte-China violated AS 1015 by failing to conduct independent testing of client accounts and transactions.
43. AS 1105 (Audit Evidence) requires auditors to "perform audit procedures to obtain sufficient appropriate audit evidence" and specifies that "the auditor should determine the means of selecting items for testing to obtain evidence that, in combination with other relevant evidence, is sufficient to meet the objective of the audit procedure." Deloitte-China violated AS 1105 by failing to obtain appropriate audit evidence sufficient to support the opinions expressed in its audit reports.
44. AS 1215 (Audit Documentation) requires auditors to document the procedures performed, evidence obtained, and conclusions reached with respect to relevant financial statement assertions. Audit documentation must "clearly demonstrate that the work was in fact performed." Deloitte-China violated AS 1215 by failing to maintain written records establishing that its audit personnel had performed the testing they were required to complete in support of the firm's audit opinions.
45. AS 2201 (Integrated Internal Control and Financial Statement Audit) requires that, when an auditor conducts an audit of an issuer's ICFR, the auditor must "plan and perform the audit to obtain appropriate evidence that is sufficient to obtain reasonable assurance about whether material weaknesses exist as of the date specified in management's assessment." Deloitte-China violated AS 2201 by failing to obtain appropriate evidence sufficient to obtain reasonable assurance about the existence of material weaknesses in impacted issuers' ICFR.
46. AS 2315 (Audit Sampling) requires auditors to "use professional judgment in planning, performing, and evaluating a sample." Where an auditor is unable to apply the planned audit procedures because supporting documentation is missing, AS 2315 outlines specific steps the auditor should take to address the impact of the missing documentation. In this case, Deloitte-China violated AS 2315 by failing to independently select and evaluate audit samples. In addition, in at least one instance, where audit documentation was missing, Deloitte-China improperly had the client substitute other audit samples, instead of evaluating the impact of the missing documentation on the audit.
47. AS 1201 (Supervision of the Audit Engagement) requires auditors to supervise the work of engagement team members so that the work is performed as directed and supports the conclusions reached. Deloitte-China violated AS 1201 when partners and other supervisory staff on the deficient audits failed to supervise the work of engagement team members sufficiently to ensure the work required was properly performed and supported the conclusions reached.
48. PCAOB Quality Control Standards require an audit firm to effectively design, implement, and maintain a system of quality control for the firm's accounting and auditing practice. QC 20.01. A system of quality control is "broadly defined as a process to provide the firm with reasonable assurance that its personnel comply with applicable professional standards and the firm's standards of quality." QC 20.03. The quality control practices and procedures relevant to a firm's auditing practice include hiring, assigning personnel with appropriate technical training and proficiency to engagements, professional education and development, and engagement performance. QC 20.13 and 20.17.
49. Deloitte-China violated QC 20 by failing to establish policies and procedures sufficient to provide reasonable assurance that the work required to be performed by audit personnel met applicable professional standards and regulatory requirements. Among other things, Deloitte-China's personnel management policies and procedures failed to ensure audit staffing at sufficient levels of seniority to allow audit personnel on impacted audits to complete the audit work in a timely and competent manner. Moreover, certain of Deloitte-China's policies and procedures for PCAOB audits relating to engagement performance failed to provide reasonable assurance that the work performed by the audit teams would satisfy the applicable professional standards in their component audits and FPI audits.
50. Rule 2-02(b)(1) of Regulation S-X requires an accountant's report to state "the applicable professional standards under which the audit was conducted." An auditor violates Regulation S-X Rule 2-02(b)(1) when it issues a report stating that it has conducted its audit in accordance with PCAOB standards when it has not. In its audit opinions issued for FPIs, Deloitte-China willfully/16 violated Regulation S-X Rule 2-02(b)(1) when it issued audit opinions for impacted audits stating that it had conducted its audits in accordance with PCAOB standards when in fact it had not.
FINDINGS
51. Based on the foregoing, the Commission finds that Deloitte-China engaged in improper professional conduct pursuant to Exchange Act Section 4C(a)(2) and Rule 102(e)(1)(ii) of the Commission's Rules of Practice.
52. Based on the foregoing, the Commission finds that Deloitte-China willfully violated Regulation S-X Rule 2-02(b)(1) pursuant to Exchange Act Section 4C(a)(3) and Rule 102(e)(1)(iii).
COOPERATION AND REMEDIAL EFFORTS
53. In determining whether to accept the Offer, the Commission considered DeloitteChina's cooperation and remedial efforts. Deloitte-China cooperated extensively with the Commission staff. After Deloitte-China became aware of allegations of misconduct, it conducted an investigation through an international law firm that identified certain violative conduct and informed the PCAOB of the conduct. After the Commission learned of the matter through the PCAOB, Deloitte-China provided the Commission staff with prompt updates of its findings throughout its investigation. Deloitte-China notified impacted audit clients. The firm's audit personnel, at times working with Deloitte-U.S., re-performed the deficient testing it had found and did not identify any material errors or significant control deficiencies. Deloitte-China has also undertaken significant remedial efforts to improve its audit practice, including instituting enhanced procedures to improve the quality of its audits, its workload and personnel management, and its monitoring and communications of auditing standards.
54. The Commission also considered Deloitte-China's ongoing remedial efforts to assess the improvements the firm has made to its audit practice and to determine whether additional improvements to its policies and procedures relating to compliance with PCAOB auditing standards are warranted. In connection with these efforts, Deloitte-China is participating in an independent review of its policies and procedures that is being monitored by Deloitte-Global. Deloitte-China has committed to adopting, as soon as practicable, all of the recommendations arising from this independent review. Deloitte-China has committed to developing and implementing a plan, approved and overseen by Deloitte-Global, to address any deficiencies in its policies and procedures related to Deloitte-China's system of quality control, and will certify, through its Chief Executive Officer, to Deloitte-Global that it has adopted all of the recommendations from this independent review. Deloitte-China has committed, thereafter, to participating in three annual reviews overseen by Deloitte-Global to determine whether its policies and procedures are adequate and sufficient to provide reasonable assurance of compliance with all PCAOB auditing standards identified in this Order. Deloitte-China has committed to documenting these reviews and its improvements in reports certified by its Chief Executive Officer to Deloitte-Global that describe the nature and scope of the reviews; the Chief Executive Officer's review and evaluation of the firm's assessment and testing process; and whether, based on belief and after reasonable inquiry, the Chief Executive Officer believes that Deloitte-China's policies and procedures are adequate and sufficient to provide reasonable assurance of compliance with PCAOB auditing standards. Based on the findings of each of these annual reviews, Deloitte-China has committed to developing and implementing plans, approved and monitored by Deloitte-Global, to address any deficiencies in its policies and procedures related to Deloitte-China's system of quality control.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondent's Offer.
Accordingly, it is hereby ORDERED that:
A. Deloitte-China shall cease and desist from committing or causing any violations and any future violations of Rule 2-02(b)(1) of Regulation S-X.
B. Deloitte-China be, and hereby is, censured.
C. For the next 36 months, each Deloitte-China audit professional serving U.S. public company audit clients shall complete a minimum of 16 training hours annually in topics covering all of the professional standards described in paragraphs 42 to 49 above in addition to any required continuing professional education credits. For audit professionals with supervisory responsibilities over such professionals, the training shall, in addition, include 8 training hours annually over the same 36-month period in topics covering paragraph 47 above.
D. Deloitte-China shall complete all remedial efforts identified in paragraph 54.
E. Respondent shall, within 60 days of the entry of this Order, pay a civil money penalty in the amount of $20,000,000 to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). If timely payment is not made, interest shall accrue pursuant to 31 U.S.C. Sec. 3717.
Payment must be made in one of the following ways:
(1) Respondent may transmit payment electronically to the Commission, which will provide detailed ACH transfer/Fedwire instructions upon request;
(2) Respondent may make direct payment from a bank account via Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or
(3) Respondent may pay by certified check, bank cashier's check, or United States postal money order, made payable to the Securities and Exchange Commission and hand-delivered or mailed to:
Enterprise Services Center
Accounts Receivable Branch
HQ Bldg., Room 181, AMZ-341
6500 South MacArthur Boulevard
Oklahoma City, OK 73169
Payments by check or money order must be accompanied by a cover letter identifying Deloitte Touche Tohmatsu Certified Public Accountants, LLP as a Respondent in these proceedings, and the file number of these proceedings; a copy of the cover letter and check or money order must be sent to Melissa Hodgman, Division of Enforcement, Securities and Exchange Commission, 100 F St., NE, Washington, DC 20549.
F. Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated as penalties paid to the government for all purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of compensatory damages by the amount of any part of Respondent's payment of a civil penalty in this action ("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed in this proceeding. For purposes of this paragraph, a "Related Investor Action" means a private damages action brought against Respondent by or on behalf of one or more investors based on substantially the same facts as alleged in the Order instituted by the Commission in this proceeding.
By the Commission.
Vanessa A. Countryman, Secretary
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View footnotes at https://www.sec.gov/litigation/admin/2022/34-95938.pdf
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Original text here: https://www.sec.gov/litigation/admin/2022/34-95938.pdf
SEC Issues Accounting & Auditing Enforcement Order Involving Barclays and Barclays Bank
WASHINGTON, Sept. 30 -- The Securities and Exchange Commission's Accounting and Auditing Enforcement issued the following order (No. 4344) on Sept. 29, 2022:* * *
In the Matter of BARCLAYS PLC and BARCLAYS BANK PLC Respondents.
ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF 1933 AND SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER
I.
The Securities and Exchange Commission ("Commission") deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section ... Show Full Article WASHINGTON, Sept. 30 -- The Securities and Exchange Commission's Accounting and Auditing Enforcement issued the following order (No. 4344) on Sept. 29, 2022: * * * In the Matter of BARCLAYS PLC and BARCLAYS BANK PLC Respondents. ORDER INSTITUTING CEASE-AND-DESIST PROCEEDINGS PURSUANT TO SECTION 8A OF THE SECURITIES ACT OF 1933 AND SECTION 21C OF THE SECURITIES EXCHANGE ACT OF 1934, MAKING FINDINGS, AND IMPOSING A CEASE-AND-DESIST ORDER I. The Securities and Exchange Commission ("Commission") deems it appropriate that cease-and-desist proceedings be, and hereby are, instituted pursuant to Section8A of the Securities Act of 1933 ("Securities Act") and Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against Barclays PLC ("BPLC") and Barclays Bank PLC ("BBPLC") (together, "Respondents").
II.
In anticipation of the institution of these proceedings, Respondents have submitted an Offer of Settlement (the "Offer") which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission, or to which the Commission is a party, and without admitting or denying the findings herein, except as to the Commission's jurisdiction over them and the subject matter of these proceedings, which are admitted, Respondents consent to the entry of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-Desist Order ("Order"), as set forth below.
III.
On the basis of this Order and Respondents' Offer, the Commission finds/1 that
Summary
1. This matter arises from BBPLC's failure to put into place any internal control around the real-time tracking of securities being offered or sold off of its Commission-registered shelf registration statement. As a result of this failure, BBPLC offered and sold an unprecedented amount of securities--cumulatively totaling approximately $17.7 billion--in excess of what it had registered with the Commission, in violation of Sections 5(a) and (c) of the Securities Act. And, in connection with the over-issuances and internal control failure, BPLC and BBPLC restated their year-end 2021 audited financial statements filed with the Commission.
2. In May 2017, BPLC and BBPLC lost their status as well-known seasoned issuers ("WKSI"). On February 22, 2018, BBPLC filed an amended registration statement to convert its prior WKSI shelf to a non-WKSI shelf ("2018 Shelf"), for the approximately 18 months remaining until its expiration. The 2018 Shelf was declared effective on March 30, 2018, and included a specification of the maximum aggregate offering price of securities available to be offered or sold from the 2018 Shelf.
3. On June 14, 2019, BBPLC filed a registration statement for a new non-WKSI shelf ("2019 Shelf") to replace the 2018 Shelf. The 2019 Shelf was declared effective on August 1, 2019, and included a specification of the maximum aggregate offering price of securities available to be offered or sold from the 2019 Shelf.
4. As it was nearing expiration, the 2018 Shelf still had securities remaining for additional offers or sales. Therefore, as part of internal considerations around the registration of the 2019 Shelf, BBPLC personnel completed an exercise ("Carry-Over Calculations"), whereby they calculated (1) the amount of securities needed for offers or sales from the 2018 Shelf during the period between BBPLC's filing of its shelf registration statement for the 2019 Shelf and the date when the 2019 Shelf became effective ("Gap Period"), and (2) the amount of securities left over on the 2018 Shelf after accounting for the projected Gap Period offers or sales, which were to be de-registered, with the registration fees originally assessed on those securities to be used to offset a portion of the registration fees associated with the 2019 Shelf.
5. At the time of the registration of both the 2018 Shelf and the 2019 Shelf, certain BBPLC personnel recognized the need to accurately record relevant information about securities that were offered or sold so as to be able to track the aggregate amount of securities that were cumulatively offered and sold from each respective Shelf on a real-time basis, thereby ensuring that BBPLC did not offer or sell any securities in excess of what had been registered. No internal control was established to address this issue, and the amount of securities that were offered and sold was not tracked.
6. As a result, the Carry-Over Calculations were incorrect, so that during some of the Gap Period, beginning on or around June 26, 2019, BBPLC offered and sold securities in excess of the amount remaining on the 2018 Shelf, ultimately leading to BBPLC offering and selling approximately $1.3 billion of securities in excess of what was registered with the Commission on the 2018 Shelf.
7. In addition, due to its failure to establish any internal control to track the amount of securities that were offered or sold on a real-time basis, beginning on or around January 28, 2021, BBPLC offered and sold securities in excess of what was registered on the 2019 Shelf. These over-issuances continued until on or around March 9, 2022, when BBPLC discovered this issue. Over the 14-month period of over-issuance, BBPLC offered and sold approximately $16.37 billion of securities in excess of what was registered with the Commission on the 2019 Shelf.
8. On March 14, 2022, BBPLC reported the issue to regulators and disclosed to the market that BBPLC did not have sufficient issuance capacity to support further sales from inventory and any further issuances of certain exchange-traded notes ("ETN"). On March 28, 2022, BPLC publicly disclosed details concerning the internal control issues related to, and the potential financial impact of, the over-issuance by BBPLC. Also on that date, BPLC announced BBPLC's intent to offer rescission to investors who had purchased securities from BBPLC in relevant unregistered transactions.
9. The over-issuance impacted both BPLC's and BBPLC's year-end 2021 financial statements. On May 23, 2022, both BPLC and BBPLC filed amendments to their annual reports on Forms 20-F with the Commission, restating their financial statements, by recording a provision and contingent liability relating to the over-issuances and disclosing management's conclusions as to the ineffectiveness of internal control over financial reporting ("ICFR") and disclosure controls and procedures ("DCP") due to a material weakness identified in ICFR.
10. On August 1, 2022, BBPLC commenced the rescission offer, which expired on September 12, 2022.
Respondents
11. BPLC is a bank holding company, headquartered in London, United Kingdom. Through its subsidiaries, BPLC provides various financial services, including investment banking, wealth management, and the offer and sale of securities. BPLC has registered the common shares underlying its American Depository Receipts ("ADR") with the Commission pursuant to Section 12(b) of the Exchange Act, and its ADRs trade on the New York Stock Exchange under the ticker symbol "BCS." BPLC has an obligation to file periodic reports with the Commission pursuant to Section 13(a) of the Exchange Act.
12. BBPLC is a global bank, headquartered in London, United Kingdom and a whollyowned subsidiary of BPLC. BBPLC provides various financial services, including the offer and sale of securities. BBPLC has listed a series of corporate debt securities on U.S. exchanges, each class of which has been registered with the Commission pursuant to Section 12(b) of the Exchange Act. BBPLC has an obligation to file periodic reports with the Commission pursuant to Section 13(a) of the Exchange Act.
Facts
A. Section 5 of Securities Act
13. A foundational principle of the federal securities laws is that securities offerings must either be registered or exempt from registration.
14. Section 5(a) of the Securities Act prohibits the direct or indirect sale of securities through the mail or interstate commerce unless a registration statement has been filed and is in effect. Section 5(c) prohibits the offer to sell securities through the mail or interstate commerce unless a registration statement has been filed. Offers and sales must either be registered or meet the requirements of an exemption from registration.
B. BBPLC Shelf
15. Historically, BBPLC has offered and sold securities pursuant to an effective shelf registration statement,/2 on Form F-3.
16. The BBPLC shelf registration statement is largely used by BBPLC's Structured Products Group for the offer or sale of structured notes/3 and ETNs./4 In addition, on occasion, the Group Treasury function for Respondents and related entities ("Group Treasury") also uses the shelf registration statement to sell corporate debt securities./5
C. Loss of WKSI Status
17. On May 10, 2017, the Commission instituted settled public administrative and cease-and-desist proceedings against Barclays Capital Inc.--a subsidiary of BBPLC--arising out of its former wealth and investment management business. In the Matter of Barclays Capital Inc., Adm. Proc. File No. 3-17978 (May 10, 2017).
18. As a result of that action, BPLC and BBPLC became ineligible issuers under Securities Act Rule 405, thereby losing their status as WKSIs. Loss of WKSI status meant that, among other things, BPLC and BBPLC would be unable to file automatic shelf registration statements, which allow WKSIs to register unspecified amounts of different specified types of securities on immediately effective registration statements. A WKSI using an automatic shelf registration statement also is permitted to pay filing fees on a "pay-as-you-go" basis at the time of each takedown off the shelf. Practically, for any new shelf registration statement on Form F-3 being utilized, BPLC and BBPLC would, among other things, need to quantify the total amount of securities that they anticipated offering and selling over the duration of the shelf and pay the registration fees for those securities in advance.
19. Following the loss of WKSI status, certain personnel from BBPLC understood the consequences of this status change, including that they should consider implementing a mechanism to track offers and sales of securities off any shelf, relative to the registered amount of securities available to be offered or sold off that shelf, in order to ensure that no securities in excess of the amount registered were offered or sold.
D. BBPLC Working Group
1. Conversion of WKSI Shelf to 2018 Shelf
20. BBPLC needed to address its loss of WKSI status with respect to its ongoing securities offerings. As a result, in or around January 2018, BBPLC formed a working group ("Working Group") that included trading desk heads from the Structured Products Group, personnel from an administrative support function called business management, personnel from the product origination group, a member of the compliance department, and a member of the legal department.
21. Initially, the Working Group focused on two issues. First, the Working Group considered whether (1) to amend the existing registration statement to convert BBPLC's existing WKSI shelf into a non-WKSI shelf for approximately 18 months, or (2) to file a new registration statement to register a new, non-WKSI shelf for three years. The Working Group concluded that BBPLC should convert the WKSI shelf into what eventually became the 2018 Shelf.
22. Second, the Working Group worked with the trading desks that would be using the 2018 Shelf in their business, as well as Group Treasury, to calculate the total amount of securities that they anticipated offering and selling over the next approximately 18 months, given that BBPLC sought to register the total amount of securities that it anticipated offering and selling during that period and pay the registration fees for that amount of securities in advance. As part of these calculations, the Working Group also determined an initial allocation of fees among the trading desks accessing the 2018 Shelf, with the expectation that these allocations would be revisited as data regarding actual offers and sales off of the 2018 Shelf became available.
23. On February 22, 2018, BBPLC filed a post-effective amendment, which amended its prior registration statement on Form F-3 (File No. 333-212571), and on March 30, 2018, BBPLC's post-effective amendment was declared effective. The filing fees for the 2018 Shelf covered the offer or sale of approximately $21.3 billion of securities, for a period of approximately 18 months.
24. During the pendency of the Working Group's efforts, the need to track actual offers and sales of securities against the amount of registered securities on a real-time basis was understood by and discussed among members of the Working Group. Nevertheless, no internal control was established to track offers and sales of securities, nor was any member of the Working Group or other BBPLC personnel performing that task.
2. Registration of 2019 Shelf
25. As the 2018 Shelf approached its expiration, the Working Group was reconstituted, with largely the same membership as in 2018. The Working Group undertook a similar approach as previously--including, calculating the total amount of securities that they anticipated offering or selling during the three-year duration of what would become the 2019 Shelf and determining an initial allocation of fees among the trading desks accessing the 2019 Shelf--but the Working Group also needed to perform the Carry-Over Calculations.
26. Specifically, because the 2018 Shelf had excess securities still available to offer or sell, the Working Group needed to determine two amounts. First, it needed to determine how much was needed for offers or sales of securities from the 2018 Shelf during the Gap Period. Second, it needed to determine how many securities would be left over on the 2018 Shelf after accounting for the anticipated Gap Period offers or sales. BBPLC de-registered those remaining securities and used the fees that were originally assessed on those securities to offset a portion of its registration fees due for the 2019 Shelf.
27. On August 1, 2019, BBPLC's registration statement on Form F-3 (File No. 333-232144) was declared effective. The filing fees for the 2019 Shelf covered the offer or sale of approximately $20.8 billion of securities, for a period of three years.
28. Despite the labor intensive work to manually calculate the Carry-Over Calculations and the payment of registration fees related to the 2019 Shelf, again no internal control was established to track offers and sales of securities on a real-time basis, nor was any member of the Working Group or other BBPLC personnel performing that task.
E. Over-Issuances
29. On March 8, 2022, a member of Group Treasury reached out to the member of the legal department who had been part of the Working Group, inquiring as to how many securities remained available to be offered and sold off of the 2019 Shelf because Group Treasury was planning on doing a sale of corporate debt securities.
30. Over the course of that day and the next, various BBPLC personnel attempted to calculate the cumulative amount of securities offered and sold from the 2019 Shelf in order to determine the amount of securities that remained available for sale. Over the course of these efforts, it became clear to all involved that there was no internal control in place to track in real time the amount of securities offered and sold against the amount of securities registered.
31. On or around March 9, 2022, BBPLC personnel concluded that securities had been offered and sold in excess of what had been registered on the 2019 Shelf. Shortly thereafter, BBPLC halted new offers and sales of securities from the 2019 Shelf and, on March 14, 2022, alerted regulators about the over-issuance and disclosed to the market that BBPLC did not have sufficient issuance capacity to support further sales from inventory and any further issuances of certain ETNs.
32. On March 28, 2022, BPLC publicly disclosed details around the internal control issues and potential financial impact of BBPLC's over-issuance from the 2019 Shelf.
33. In early June 2022, in connection with an internal investigation into the over-issuance from the 2019 Shelf, BBPLC discovered that the Carry-Over Calculations were incorrect. In fact, BBPLC had de-registered too large an amount of securities from the 2018 Shelf. As a result, during some of the Gap Period, beginning on June 26, 2019, BBPLC offered and sold approximately $1.3 billion of securities in excess of what had remained on the 2018 Shelf.
34. These miscalculations also elongated the time period and increased the amount of the over-issuance from the 2019 Shelf from what BBPLC had originally calculated. In the end, the first over-issuance occurred on or around January 28, 2021, and BBPLC offered and sold approximately $16.37 billion of securities in excess of the amount registered with the Commission from the 2019 Shelf.
F. BPLC and BBPLC Restatements
35. On April 28, 2022, in connection with its first quarter 2022 results announcement, BPLC disclosed that, as a result of BBPLC's over-issuance, it was in discussions with the Commission about filing a restatement of its year-end 2021 audited financial statements previously filed with the Commission and that BBPLC was in the process of preparing a restatement for its year-end 2021 audited financial statements previously filed with the Commission. On May 16, 2022, BPLC announced that its Board of Directors determined that BPLC would restate its year-end 2021 audited financial statements filed with the Commission.
36. On May 23, 2022, both BPLC and BBPLC filed amendments to their 2021 annual reports on Forms 20-F with the Commission including the restatements. The restatements reflected a pound sterling220 million litigation and conduct provision and an associated income statement charge as of year-end 2021 and a contingent liability disclosure, all with respect to the potential impact of the over-issuance from the 2019 Shelf. The restatements also amended disclosures to reflect management's conclusions that ICFR and DCP were not effective as of year-end 2021, due to a material weakness in ICFR identified after the original filing date as a result of the over-issuance from the 2019 Shelf.
G. Rescission Offer
37. Section 12(a)(1) of the Securities Act provides for civil liability for "[a]ny person who . . . offers or sells a security in violation" of Section 5 of the Securities Act. The remedy available under Section 12(a)(1) is rescission. Section 13 of the Securities Act prohibits actions to enforce liability under Section 12(a)(1) unless brought within one year after the violation upon which it is based.
38. On March 28, 2022, BBPLC announced its intent to conduct a rescission offer with respect to the over-issuance. And, on August 1, BBPLC commenced its rescission offer, as described in a Prospectus Supplement to the Prospectus dated May 23, 2022, in connection with its registration statement on Form F-3 (File No. 333-265158)./6 The rescission offer expired on September 12, 2022.
39. BBPLC included as eligible securities for purposes of its rescission offer all of those securities that were offered or sold in excess of what was registered on the 2018 Shelf and the 2019 Shelf, including over-issuances for which an action otherwise would have been barred under Section 12(a)(1).
H. Respondents' Cooperation and Remedial Efforts
40. In determining to accept the Offer, the Commission considered cooperation afforded the Commission staff and remedial acts promptly undertaken by Respondents.
41. Among other things, Respondents identified the over-issuance from the 2019 Shelf, later identified the over-issuance from the 2018 Shelf, self-reported both over-issuances to regulators, and initiated an internal investigation. Respondents presented interim findings to Commission staff throughout the internal investigation, as well as conclusions to Commission staff upon substantial completion of the investigation. Respondents also voluntarily provided relevant documents, made personnel available for voluntary testimony, and provided assistance in obtaining relevant information from third parties.
42. BBPLC also initiated a rescission offer to provide compensation to investors by either repurchasing relevant securities from current holders or by paying equivalent rescissory damages to former holders and included as eligible securities for purposes of its rescission offer all securities that were offered or sold in unregistered transactions, including those for which actions would otherwise be barred under Section 12(a)(1) of the Securities Act.
43. Respondents also initiated a review of policies and procedures and internal controls relating to BBPLC's Commission-registered shelves ("BBPLC Shelf Review") soon after identification of the over-issuance, which included (1) an assessment of end-to-end processes to identify any significant control gaps related to the offers and sales off of BBPLC's Commissionregistered shelves, and (2) recommendations for enhancements designed to effect compliance with Section 5 of the Securities Act.
Violations
44. As a result of the conduct described above, BBPLC violated Section 5(a) of the Securities Act, which states that "[u]nless a registration statement is in effect as to a security, it shall be unlawful for any person, directly or indirectly, (1) to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to sell such security through the use or medium of any prospectus or otherwise, or (2) to carry or cause to be carried through the mails or in interstate commerce, by any means or instruments of transportation, any such security for the purpose of sale or for delivery after sale."
45. As a result of the conduct described above, BBPLC violated Section 5(c) of the Securities Act, which states that "[i]t shall be unlawful for any person, directly or indirectly, to make use of any means or instruments of transportation or communication in interstate commerce or of the mails to offer to sell or offer to buy through the use or medium of any prospectus or otherwise any security, unless a registration statement has been filed as to such security."
46. As a result of the conduct described above, Respondents violated Section 13(a) of the Exchange Act and Rules 12b-20 and 13a-1 thereunder, which, among other things, require every issuer of a security registered pursuant to Section 12 of the Exchange Act to file accurate annual reports with the Commission, and that such reports contain all material information necessary to make the required statements in the reports not misleading.
47. As a result of the conduct described above, Respondents violated Section 13(b)(2)(A) of the Exchange Act, which requires issuers with securities registered under Section 12 of the Exchange Act or which are required to file reports pursuant to Section 15(d) of the Exchange Act to make and keep books, records, and accounts which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of assets of the issuer.
48. As a result of the conduct described above, Respondents violated Section 13(b)(2)(B) of the Exchange Act, which requires issuers with securities registered under Section 12 of the Exchange Act or which is required to file reports pursuant to Section 15(d) of the Exchange Act to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurance that, among other things, transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP or other criteria applicable to such statements.
49. As a result of the conduct described above, Respondents violated Exchange Act Rule 13a-15(a), which requires issuers with securities registered under Section 12 of the Exchange Act to maintain disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) and also requires issuers required to file reports pursuant to Section 13(a) or Section 15(d) of the Exchange Act to maintain internal control over financial reporting as defined in Exchange Act Rule 13a-15(f).
Disgorgement
The disgorgement and prejudgment interest ordered in Section IV.D. below is consistent with equitable principles and does not exceed BBPLC's net profits from its violations.
Undertakings
A. Respondents have undertaken as follows:
By sixty (60) days from the issuance of the Order, BBPLC shall adopt and implement the following BBPLC Shelf Review recommendations for enhancements designed to effect compliance with Section 5 of the Securities Act:
1. The centralization of oversight of BBPLC's SEC-registered shelves in Group Treasury;
2. The maintenance of clear minimum control requirements for BBPLC's SEC-registered shelves, including, but not limited to, a process for reviewing any change in WKSI status for BBPLC and the tracking of offers and sales off of BBPLC's SEC-registered shelves as appropriate; and
3. The maintenance of a data repository, with appropriate controls and governance designed to ensure reliability of the data, for the purpose of tracking offers and sales, as appropriate, off of BBPLC's SEC-registered shelves.
By ninety (90) days from the completion of the undertakings described above, Respondents' Internal Audit function shall (1) complete an audit of BBPLC's policies and procedures and internal controls relating to compliance with Section 5 of the Securities Act in connection with BBPLC's SEC-registered shelves to confirm the adoption and implementation of the undertakings described above; and (2) submit its audit report ("Internal Audit Report") to the Audit Committee of Respondents' Boards of Directors and the Commission staff.
BBPLC shall certify, in writing, compliance with the undertakings set forth above. The certification shall be made by BBPLC's Treasurer. The certification shall identify the undertaking, provide written evidence of compliance in the form of a narrative, and be supported by exhibits sufficient to demonstrate compliance. The Commission staff may make reasonable requests for further evidence of compliance, and Respondents agree to provide such evidence. The certification and supporting material shall be submitted to Sheldon L. Pollock, with a copy to the Office of Chief Counsel of the Enforcement Division, no later than thirty (30) days from the submission of the Internal Audit Report described above.
B. The Internal Audit Report will likely include confidential financial, proprietary, competitive business or commercial information. Public disclosure of the Internal Audit Report could discourage cooperation, impede pending or potential government investigations or undermine the objectives of the reporting requirement. For these reasons, among others, the reports and the contents thereof are intended to remain and shall remain non-public, except (1) pursuant to court order, (2) as agreed to by the parties in writing, (3) to the extent that the Commission determines in its sole discretion that disclosure would be in furtherance of the Commission's discharge of its duties and responsibilities, or (4) is otherwise required by law.
C. Respondents shall preserve, for a period of not less than six (6) years from the end of the fiscal year last used, the first two (2) years in an easily accessible place, any record of compliance with these undertakings.
D. For good cause shown, the Commission staff may extend any of the procedural dates relating to the undertakings. Deadlines for procedural dates shall be counted in calendar days, except that if the last day falls on a weekend or federal holiday, the next business day shall be considered to be the last day.
IV.
In view of the foregoing, the Commission deems it appropriate to impose the sanctions agreed to in Respondents' Offer.
Accordingly, it is hereby ORDERED that:
A. Pursuant to Section 8A of the Securities Act, BBPLC cease and desist from committing or causing any violations or any future violations of Sections 5(a) and (c) of the Securities Act.
B. Pursuant to Section 21C of the Exchange Act, Respondents cease and desist from committing or causing any violations and any future violations of Sections 13(a), 13(b)(2)(A), and 13b(2)(B) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-15(a) thereunder.
C. Respondents shall comply with undertakings enumerated in Section III.A.-D. above.
D. BBPLC shall pay disgorgement in the amount of $149,731,011.00 and prejudgment interest thereon in the amount of $11,463,229.00. Payment of these amounts shall be deemed satisfied by BBPLC's offer of rescission to impacted investors that commenced on August 1, 2022 and expired on September 12, 2022.
E. Respondents shall, within 14 days of entry of the Order, jointly and severally pay a civil money penalty in the amount of $200,000,000.00 to the Securities and Exchange Commission. The Commission may distribute civil money penalties collected in this proceeding if, in its discretion, the Commission orders the establishment of a Fair Fund pursuant to 15 U.S.C. Sec. 7246, Section 308(a) of the Sarbanes-Oxley Act of 2002. The Commission will hold funds paid pursuant to this paragraph in an account at the United States Treasury pending a decision whether the Commission, in its discretion, will seek to distribute funds or, subject to Exchange Act Section 21F(g)(3), transfer them to the general fund of the United States Treasury. If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. Sec.3717.
Payment must be made in one of the following ways:
(1) Respondents may transmit payment electronically to the Commission, which will provide detailed ACH transfer/Fedwire instructions upon request;
(2) Respondents may make direct payment from a bank account via Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or
(3) Respondents may pay by certified check, bank cashier's check, or United States postal money order, made payable to the Securities and Exchange Commission and hand-delivered or mailed to:
Enterprise Services Center
Accounts Receivable Branch
HQ Bldg., Room 181, AMZ-341
6500 South MacArthur Boulevard
Oklahoma City, OK 73169
Payments by check or money order must be accompanied by a cover letter identifying BPLC and BBPLC as Respondents in these proceedings, and the file number of these proceedings; a copy of the cover letter and check or money order must be sent to Sheldon L. Pollock, Division of Enforcement, Securities and Exchange Commission, New York Regional Office, 100 Pearl Street, Suite 20-100, New York, New York 10004.
F. Regardless of whether the Commission in its discretion orders the creation of a Fair Fund for the penalties ordered in this proceeding, amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated as penalties paid to the government for all purposes, including all tax purposes. To preserve the deterrent effect of the civil penalty, Respondents agree that in any Related Investor Action, they shall not argue that they are entitled to, nor shall they benefit by, offset or reduction of any award of compensatory damages by the amount of any part of Respondents' payment of a civil penalty in this action ("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty Offset, Respondents agree that they shall, within 30 days after entry of a final order granting the Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed in this proceeding. For purposes of this paragraph, a "Related Investor Action" means a private damages action brought against Respondents by or on behalf of one or more investors based on substantially the same facts as alleged in the Order instituted by the Commission in this proceeding.
G. Respondents shall cooperate fully with the Commission staff and shall provide the Commission staff with files, records, and/or supporting documentation as the Commission staff may request for the purpose of any distribution from any Fair Fund, if, in its discretion, the Commission orders the establishment of a Fair Fund pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002.
By the Commission.
Vanessa A. Countryman, Secretary
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Footnotes:
1/ The findings herein are made pursuant to Respondents' Offer of Settlement and are not binding on any other person or entity in this or any other proceeding.
2/ A shelf registration statement is a filing to register a public offering of securities which permits an issuer to make multiple offerings based on the same registration statement.
3/ Structured notes are securities issued by financial institutions whose returns are linked to the performance of reference assets or indices. Structured notes have a fixed maturity and include two components--a bond component and an embedded derivative.
4/ ETNs are unsecured debt obligations of financial institutions that trade on a securities exchange. ETN payment terms are linked to the performance of a reference index or benchmark, representing the ETN's investment objective.
5/ Corporate debt securities are debt obligations issued by companies, which are used to raise money for a variety of corporate purposes. Companies promise to return the face value of the bond, also known as principal, on a specified maturity date. Until that date, companies usually pay a stated rate of interest.
6/ BBPLC amended its rescission offer on August 12, 2022, to include certain additional eligible securities.
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Original text here: https://www.sec.gov/litigation/admin/2022/33-11110.pdf
FCC Commissioner Simington Issues Statement on Space Innovation
WASHINGTON, Sept. 30 -- The Federal Communications Commission issued the following statement by Commissioner Nathan Simington on an action entitled "Space Innovation; Mitigation of Orbital Debris in the New Space Age" (IB Dockets No. 22-271; 18-313).* * *
The Commission adopts a rule requiring non-geostationary satellite operators to deorbit satellites within five years after the completion of their missions. We require both that domestic licensees, and foreign operators granted access to the United States market, responsibly dispose of satellites that have served their purpose. This Order marks ... Show Full Article WASHINGTON, Sept. 30 -- The Federal Communications Commission issued the following statement by Commissioner Nathan Simington on an action entitled "Space Innovation; Mitigation of Orbital Debris in the New Space Age" (IB Dockets No. 22-271; 18-313). * * * The Commission adopts a rule requiring non-geostationary satellite operators to deorbit satellites within five years after the completion of their missions. We require both that domestic licensees, and foreign operators granted access to the United States market, responsibly dispose of satellites that have served their purpose. This Order markswhat I hope is the dawn of a new regulatory approach to the space economy: rules that are tough, sensible, and performance-based. Rules that, I hope, will form the bedrock of a safe, sustainable, and innovative space economy.
Let me be clear. Orbital debris is a problem, but not a crisis. Not yet. Operators might be forgiven for wondering where the fire is. Indeed, we may, in the fullness of time, come to discover that active debris removal technologies are more than adequate to meet the challenge of debris generation. Or that close coordination among operators in the sharing of ephemeris data and mutual cooperation in conjunction management works just fine without our intervention. We may come to learn that, in other words, the Commission's rules are a largely unused backstop for best-in-class commercial practice. Our rules may soon be superannuated by innovative solutions from responsible operators who recognize that for any operator to succeed, each must operate with an eye toward safety and sustainability. That could happen.
In fact, I hope it does happen. But what we cannot do is bet on it. Hope is not a plan. And the operating environment of the past of a few, large, high-altitude satellites is fading from memory at a rate that feels like a step change from even five years ago. At the FCC we often talk of the spectrum pipeline--well, get a load of the satellite pipeline. Over the next decade, commercial operators plan to launch tens of thousands of new satellites into orbit. A veritable Cambrian explosion of commercial space operations is just over the horizon. We had better be ready when it arrives.
I will not reel off examples of various tragedies of the commons or other regulatory failures, except to observe that we've waited overlong before, and it has not gone well. Each of you may have a different one in mind, which is sure testimony of our sometimes inability to learn this lesson. That is: there is no worse time to draw up ex ante rules for peaceful and productive coexistence than in the throes of an ex post crisis. We must act.
We must seize this moment; the moment practically calls out for it. The United States represents something like fifty percent of the international space economy--we therefore have, through the option of extending our orbital debris rules to any who seek market access, a regulatory hook for creating a default rulebook for commercial operators globally. We can create a unitary set of clear and flexible rules for safe commercial space operation, and we can apply that standard to any who seek access to our market. And, as things stand, that is a powerful--even irresistible--incentive.
This is a lane for American leadership in what is arguably the most innovative commercial industry, but it can close if we do nothing. Our present leadership in the space economy is not promised forever. And strong rules can be winnowed through consensus-driven multi-stakeholder bodies constrained by heckler's vetoes. It is entirely possible to miss this opportunity.
The United States has the most innovative, and largest, space economy in the world. It has a readymade mechanism, in the Commission, to promulgate rules for the entire international commercial space market, and it has compelling natural incentives for compliance. There is bipartisan support to act to lead on an issue that has, it is fair to say, the world's attention. The ancient Greeks had a term called 'kairos,' which means the perfect opportunity--not just a 'now,' but a 'right now'. There is more that we can do, and right now is the right 'now'.
I cannot begin to thank enough those within the Commission who have worked diligently, thoughtfully, and creatively on this item. My sincere thanks to the International Bureau and all staff who worked on this item. My thanks to my fellow Commissioners and their staffs who have worked hard to implement targeted changes to the language of the item. And my thanks, especially, to Chairwoman Rosenworcel and her staff. While the Chairwoman well knows that I view this Order as a first step into a new era, I cannot thank her enough for her leadership in getting us to this point. I look forward to working with her, and all of my colleagues within the agency and without, to craft sensible rules for a new space age.
Suffice it to say, the item has my support.
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Original text here: https://docs.fcc.gov/public/attachments/DOC-387720A4.pdf
EEOC Sues Sinclair Broadcast Group for Race Discrimination
BALTIMORE, Maryland, Sept. 30 -- The Equal Employment Opportunity Commission issued the following news release on Sept. 29, 2022:Sinclair Broadcast Group, Inc. violated federal law when it discriminated against an employee because of her race, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit it filed today.
According to EEOC's lawsuit, Sinclair subjected an analyst, a Black woman who worked for the company in Cockeysville, Maryland, to race discrimination when it underpaid her and forced her out of her job. Sinclair treated other employees who are not Black more favorably, ... Show Full Article BALTIMORE, Maryland, Sept. 30 -- The Equal Employment Opportunity Commission issued the following news release on Sept. 29, 2022: Sinclair Broadcast Group, Inc. violated federal law when it discriminated against an employee because of her race, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit it filed today. According to EEOC's lawsuit, Sinclair subjected an analyst, a Black woman who worked for the company in Cockeysville, Maryland, to race discrimination when it underpaid her and forced her out of her job. Sinclair treated other employees who are not Black more favorably,including paying them more to perform similar work, the agency charged. After the analyst opposed the pay discrimination and reported it to Sinclair, the company refused to remedy the disparity, thus compelling her to resign, according to the lawsuit.
Such alleged conduct violates Title VII of the Civil Rights Act of 1964, which prohibits discrimination based on race. The EEOC filed suit (EEOC v. Sinclair Broadcast Group, Inc., Case No. 1:22-cv-02477) in U.S. District Court for the District of Maryland after first attempting to reach a pre-litigation settlement through its administrative conciliation process. The EEOC is seeking permanent injunctive relief prohibiting Sinclair from discriminating against employees because of race in the future; lost wages; compensatory and punitive damages; and other relief.
"The EEOC is committed to enforcing Title VII's prohibition against pay discrimination because of race," said Rosemary Rhodes, director of the Baltimore Field Office of the agency's Philadelphia District.
Philadelphia District Office Regional Attorney Debra Lawrence said, "Engaging in race-based pay discrimination is a violation of federal law. The EEOC is committed to eradicating discriminatory pay, including pay practices that disadvantage Black women."
The EEOC's Philadelphia District Office has jurisdiction over Pennsylvania, Maryland, Delaware, West Virginia, and parts of New Jersey and Ohio. The legal staff of the EEOC also prosecutes discrimination cases in Washington, D.C. and parts of Virginia.
The EEOC advances opportunity in the workplace by enforcing federal laws prohibiting employment discrimination. More information about disability discrimination is available at https://www.eeoc.gov/eeoc-disability-related-resources. Stay connected with the latest EEOC news by subscribing to our email updates.
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Original text here: https://www.eeoc.gov/newsroom/eeoc-sues-sinclair-broadcast-group-race-discrimination
EEOC Releases New Data and Expands Visualizations
WASHINGTON, Sept. 30 -- The Equal Employment Opportunity Commission issued the following news release on Sept. 29, 2022:The U.S. Equal Employment Opportunity Commission (EEOC) today released new data on its website and added the ability for the public to visualize charges of discrimination filed with the agency by state.
New data now available at: https://www.eeoc.gov/data/employment-statistics include the 2019 and 2020 EEO-1 Component 1 data for private employers with 100 or more employees and federal contractors with 50 or more employees, 2020 EEO-3 data for referral local unions, 2021 EEO-4 ... Show Full Article WASHINGTON, Sept. 30 -- The Equal Employment Opportunity Commission issued the following news release on Sept. 29, 2022: The U.S. Equal Employment Opportunity Commission (EEOC) today released new data on its website and added the ability for the public to visualize charges of discrimination filed with the agency by state. New data now available at: https://www.eeoc.gov/data/employment-statistics include the 2019 and 2020 EEO-1 Component 1 data for private employers with 100 or more employees and federal contractors with 50 or more employees, 2020 EEO-3 data for referral local unions, 2021 EEO-4data for state and local governments, and 2020 EEO-5 data for public elementary and secondary schools.
In addition to releasing new data, the EEOC is moving static data tables for earlier years to EEOC Explore, a more dynamic platform that allows the public to better access and customize data results. For the first time, users will be able to access a charge visualization tool in EEOC Explore which offers the public a new way to look at aggregated data about charges of discrimination filed with the EEOC from fiscal years 1997-2021.
"We are pleased to take the next steps in implementing Executive Order 13985: Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, which calls on federal agencies to measure and advance equity by gathering the data necessary to inform that effort," said EEOC's Chief Data Officer Chris Haffer. "By introducing the new interactive EEO-3, EEO-4, EEO-5, and Charge Data Dashboards, the EEOC continues our commitment to publicly releasing aggregate data that may be used for evidence-based decision-making, transparency, accountability, and to inform DEIA initiatives."
The EEO data collections can provide insights into workforce demographics and are made available to the public for their own research and analysis here: https://www.eeoc.gov/data/job-patterns-minorities-and-women-private-industry-eeo-1-0#Explore.
The EEOC will continue to add new data to EEOC Explore as the data becomes available.
The EEOC advances opportunity in the workplace by enforcing federal laws prohibiting employment discrimination. More information is available at https://www.eeoc.gov/. Stay connected with the latest EEOC news by subscribing to our email updates.
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Original text here: https://www.eeoc.gov/newsroom/eeoc-releases-new-data-and-expands-visualizations
CFTC Orders Futures Commission Merchant to Pay $500,000 for Supervision Failures Relating to Improper or Fictitious Trade Transfer Requests
WASHINGTON, Sept. 30 -- The Commodity Futures Trading Commission issued the following enforcement news release on Sept. 29, 2022:The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against ADM Investor Services Inc. (ADMIS), a registered futures commission merchant (FCM) in Chicago, Illinois. The order finds that ADMIS failed to supervise its employees and agents in their handling of commodity interest accounts, and failed to perform its supervisory duties diligently. The order requires ADMIS to pay a $500,000 civil monetary penalty and to ... Show Full Article WASHINGTON, Sept. 30 -- The Commodity Futures Trading Commission issued the following enforcement news release on Sept. 29, 2022: The Commodity Futures Trading Commission today issued an order simultaneously filing and settling charges against ADM Investor Services Inc. (ADMIS), a registered futures commission merchant (FCM) in Chicago, Illinois. The order finds that ADMIS failed to supervise its employees and agents in their handling of commodity interest accounts, and failed to perform its supervisory duties diligently. The order requires ADMIS to pay a $500,000 civil monetary penalty and tocease and desist from any further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged.
"FCMs are obligated to adequately supervise their agents and employees," said CFTC Acting Director of Enforcement Gretchen Lowe. "As this case shows, it is essential that registrants have adequate policies and procedures in place to deter and detect wrongdoing, and to ensure they perform their supervisory duties diligently."
Case Background
The order finds that from December 1, 2016 to September 1, 2019, ADMIS, a registered FCM, failed to diligently supervise the handling by its employees and agents of commodity interest accounts carried by ADMIS and introduced by ADMIS' Guaranteed Introducing Brokers (GIBs), as well as the activities of its employees and agents relating to its business as a registered FCM. The order finds that prior to Spring 2018, ADMIS' account review policies and procedures were inadequate because they failed to provide adequate guidance regarding account changes requests submitted by individual brokers. The order further finds that ADMIS failed to perform its supervisory duties diligently because it failed to detect repeated incidents in which brokers employed by ADMIS or ADMIS' GIBs executed improper or fictitious trade transfer requests that violated the CEA and CFTC regulations. Through these transfers, which collectively persisted for several years, the brokers executed trades and then submitted improper or fictitious trade transfer requests to allocate winning trades to preferred customers or to accounts that they controlled or managed, while allocating losing trades to other accounts they controlled or managed.
In accepting ADMIS' settlement offer, the CFTC recognizes ADMIS' cooperation with the Division of Enforcement's investigation of this matter.
The CFTC acknowledges and appreciates the assistance of the CME Group Inc. and the National Futures Association with this matter.
The Division of Enforcement staff members responsible for this matter are Janine Gargiulo, Benjamin J. Rankin, Trevor Kokal, Patryk J. Chudy, Lenel Hickson, Jr., and Manal M. Sultan.
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Original text here: https://www.cftc.gov/PressRoom/PressReleases/8602-22