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Article
Publication date: 4 December 2020

M. Alexander Koch, Carmen J. Lawrence, Aaron Lipson, Russ Ryan, Richard H. Walker, Jessica Rapoport and Katie Barry

To analyze the impact of the U.S. Supreme Court’s decision in Liu v. SEC, where the Court confronted the issue of whether the SEC can obtain disgorgement in federal…

Abstract

Purpose

To analyze the impact of the U.S. Supreme Court’s decision in Liu v. SEC, where the Court confronted the issue of whether the SEC can obtain disgorgement in federal district court proceedings.

Design/methodology/approach

This paper provides an overview of the authors’ prior work analyzing courts’ treatment of SEC disgorgement and a summary of the background and opinion in Liu v. SEC. This article then focuses on the practical implications of Liu on SEC disgorgement by considering questions left open by the decision.

Findings

The Court in Liu held that the SEC is authorized to seek disgorgement as “equitable relief” as long as it “does not exceed a wrongdoer’s net profits and is awarded for victims.” But the Court left many unanswered questions, such as whether disgorged funds must always be returned to investors for disgorgement to be a permissible equitable remedy, whether the SEC can obtain joint-and-several disgorgement liability from unrelated co-defendants, what “legitimate expenses” should be deducted in disgorgement calculations, and to what extent the SEC can seek disgorgement in cases when victims are difficult to identify.

Originality/value

Original, practical guidance from experienced lawyers in financial services regulatory and enforcement practices, many of whom have previously worked in the SEC’s Division of Enforcement.

Details

Journal of Investment Compliance, vol. 21 no. 2/3
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 8 April 2021

Russ Ryan, Matthew H. Baughman, Carmen J. Lawrence, Aaron W. Lipson, Richard H. Walker, Jessica Rapoport, Katie Barry and Scott Hiers

To analyze the impact of recent legislation that amended the Securities Exchange Act of 1934 to expressly empower the U.S. Securities and Exchange Commission (SEC) to seek…

Abstract

Purpose

To analyze the impact of recent legislation that amended the Securities Exchange Act of 1934 to expressly empower the U.S. Securities and Exchange Commission (SEC) to seek disgorgement in federal district court proceedings and to codify applicable statutes of limitations.

Design/methodology/approach

This article provides an overview of the authors’ prior work analyzing courts’ treatment of SEC disgorgement and summarizes how the scope of the remedy has evolved since Kokesh v. SEC (2017). Then, the article analyzes the changes to the Securities Exchange Act of 1934 contained in Section 6501 the 2021 National Defense Authorization Act (NDAA), which statutorily empowered the SEC to seek and obtain disgorgement in federal court actions. Finally, the authors discuss the impact of the legislation on the Supreme Court’s decisions in Kokesh and Liu v. SEC (2020).

Findings

The availability and appropriateness of SEC disgorgement have been the subject of vigorous debate. Just as courts began to iron out the contours of SEC disgorgement in the wake of Kokesh and Liu, Congress intervened by granting to the SEC explicit statutory authority to seek a remedy traditionally obtained at equity. In passing this legislation, Congress answered some questions that remained after Liu but also raised many new ones. These new questions will likely take years to resolve through subsequent litigation and potentially additional legislation.

Originality/value

Original, practical analysis and guidance from experienced lawyers in financial services regulatory and enforcement practices, many of whom have previously worked in the SEC’s Division of Enforcement.

Details

Journal of Investment Compliance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1528-5812

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Article
Publication date: 25 November 2020

Alan R. Friedman, Dani R. James, Gary P. Naftalis, Paul H. Schoeman and Chase Henry Mechanick

To analyze the U.S, Supreme Court’s decision in Liu v. S.E.C., 140 S. Ct. 1936 (2020) and its potential implications for insider trading cases.

Abstract

Purpose

To analyze the U.S, Supreme Court’s decision in Liu v. S.E.C., 140 S. Ct. 1936 (2020) and its potential implications for insider trading cases.

Design/Methodology/Approach

Provides context on the history of disgorgement in SEC enforcement proceedings; discusses factual and procedural background underlying the Liu decision; summarizes the Court’s opinion and rationale, with a particular focus on the Court’s pronouncements regarding the permissible scope of SEC disgorgement as an equitable remedy; identifies and explores three possible issues in insider trading cases that may be affected by the Court’s narrowing of SEC disgorgement.

Findings

In Liu, the Supreme Court narrowed SEC disgorgement by stating that, as a general matter, SEC disgorgement is not permitted where: (1) the proceeds are not remitted to investors; (2) one defendant is made to disgorge profits that were received by someone else; or (3) the amount of disgorgement fails to deduct legitimate business expenses, in each case subject to possible exemptions as outlined by the Court.

Practical implications

This rule may call into question whether courts may: (a) order disgorgement against insider traders, given the difficulty of identifying investors who have been harmed; (b) order insider traders to disgorge profits earned by others on account of their violations; or (c) order insider traders to pay civil penalties under Section 21 A of the Exchange Act based on profits earned by others.

Originality/Value

Expert analysis and guidance from experienced securities enforcement lawyers with expertise in insider trading.

Details

Journal of Investment Compliance, vol. 21 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

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Abstract

Details

Corporate Fraud Exposed
Type: Book
ISBN: 978-1-78973-418-8

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Article
Publication date: 11 April 2018

Kareen Brown, Fayez A. Elayan, Jingyu Li and Zhefeng Liu

The purpose of this paper is to investigate whether US regulatory actions around reverse mergers (RM) have exerted any spillover effects on the Chinese firms listed in…

Abstract

Purpose

The purpose of this paper is to investigate whether US regulatory actions around reverse mergers (RM) have exerted any spillover effects on the Chinese firms listed in China and whether Chinese firms have exhibited lower financial reporting quality than their US counterparts.

Design/methodology/approach

To test the possible spillover effect, this paper calculates three-day cumulative average abnormal returns (CAAR) and the aggregate CAAR for a series of US regulatory actions in 2010 and 2011. The study then compares the accrual quality, conditional conservatism, and information content of accruals of Chinese firms and US firms.

Findings

The paper documents a spillover effect of US actions around RM on Chinese stocks listed in China. Overall results do not support the perception that Chinese firms have lower financial reporting quality than their US counterparts.

Research limitations/implications

While this study provides evidence consistent with investors perceiving poor financial reporting quality among Chinese firms, that perception is not justified by empirical evidence.

Practical implications

Investors need not be overly concerned about the financial reporting quality among the Chinese firms when they make asset allocation decisions.

Social implications

A reality check is important given that perceptions may be outdated, biased, misleading, and costly.

Originality/value

This study puts the financial reporting quality of Chinese firms into perspective helping global investors assess information risk for optimal resource allocation.

Details

China Finance Review International, vol. 8 no. 4
Type: Research Article
ISSN: 2044-1398

Keywords

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Article
Publication date: 23 September 2019

Guoping Liu and Jerry Sun

The purpose of this study is to examines whether clients’ share prices responded to three events, including the Securities and Exchange Commission (SEC) launch of…

Abstract

Purpose

The purpose of this study is to examines whether clients’ share prices responded to three events, including the Securities and Exchange Commission (SEC) launch of administrative proceedings against five Chinese accounting firms on December 3, 2012, for their failure to hand over audit work papers due to conflict of jurisdiction; the issuance of SEC Administrative Law Judge Elliot’s ruling on January 22, 2014; and the settlement of the administrative proceedings on February 6, 2015.

Design/methodology/approach

This study uses the Schipper and Thompson approach.

Findings

It is found that share prices responded negatively around December 3, 2012, for USA-listed Chinese companies who were audited by Chinese auditors.

Originality/value

This study provides evidence on how share prices reacted to SEC enforcement actions against an affair of non-audit failure.

Details

Managerial Auditing Journal, vol. 34 no. 9
Type: Research Article
ISSN: 0268-6902

Keywords

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Article
Publication date: 13 April 2021

Yuhe Wang, Gui Ye, Chenli Zheng and Shilian Zhang

Since China's accession of the World Trade Organization (WTO), its construction industry has attained unprecedented growth. However, for the sources of this enormous…

Abstract

Purpose

Since China's accession of the World Trade Organization (WTO), its construction industry has attained unprecedented growth. However, for the sources of this enormous growth, a controversy regarding the total factor productivity growth (TFPG) still remains in production practice and extant studies. In view of this, the purpose of this paper is to measure TFPG and to explore its sources in the industry post-WTO accession.

Design/methodology/approach

This study presents an innovative source analysis of TFPG. Stochastic frontier approach is adopted to measure TFPG and to explore its sources by decomposing TFPG into technical progress (TP), technical efficiency change (TEC), allocative efficiency change (AEC) and scale efficiency change (SEC). Although China joined WTO in 2001, to provide an effective baseline, the study period is from 2000 to 2017.

Findings

The empirical results reveal that TFPG presented an overall downward evolutionary trend, but it still maintained a high growth post-WTO accession. From the perspective of decomposition, TP was the main source of TFPG. Furthermore, as a neglected source, interaction effects among TP, TEC, AEC and SEC have been demonstrated to have a significant influence on the cumulative TFPG.

Practical implications

To make the results be reliable, the authors discuss the empirical findings mainly by revealing the reasons behind the evolutions of TFPG and its sources. Based on these revealed reasons, government and policy makers can further refine and summarize some more detailed and targeted policy implications to improve TFPG.

Originality/value

By providing many empirical evidences to solve the aforesaid TFPG controversy, this paper, therefore, enriches the body of knowledge on growth theories, especially at the level of industrial economics.

Details

Engineering, Construction and Architectural Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0969-9988

Keywords

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Article
Publication date: 9 July 2020

Jian-Gen Liu, Yi-Ying Feng and Hong-Yi Zhang

The purpose of this paper is to construct the algebraic traveling wave solutions of the (3 + 1)-dimensional modified KdV-Zakharov-Kuznetsve (KdV-Z-K) equation, which can…

Abstract

Purpose

The purpose of this paper is to construct the algebraic traveling wave solutions of the (3 + 1)-dimensional modified KdV-Zakharov-Kuznetsve (KdV-Z-K) equation, which can be usually used to express shallow water wave phenomena.

Design/methodology/approach

The authors apply the planar dynamical systems and invariant algebraic cure approach to find the algebraic traveling wave solutions and rational solutions of the (3 + 1)-dimensional modified KdV-Z-K equation. Also, the planar dynamical systems and invariant algebraic cure approach is applied to considered equation for finding algebraic traveling wave solutions.

Findings

As a result, the authors can find that the integral constant is zero and non-zero, the algebraic traveling wave solutions have different evolutionary processes. These results help to better reveal the evolutionary mechanism of shallow water wave phenomena and find internal connections.

Research limitations/implications

The paper presents that the implemented methods as a powerful mathematical tool deal with (3 + 1)-dimensional modified KdV-Z-K equation by using the planar dynamical systems and invariant algebraic cure.

Practical implications

By considering important characteristics of algebraic traveling wave solutions, one can understand the evolutionary mechanism of shallow water wave phenomena and find internal connections.

Originality/value

To the best of the authors’ knowledge, the algebraic traveling wave solutions have not been reported in other places. Finally, the algebraic traveling wave solutions nonlinear dynamics behavior was shown.

Details

Engineering Computations, vol. 38 no. 2
Type: Research Article
ISSN: 0264-4401

Keywords

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Article
Publication date: 4 March 2019

Sherwood Lane Lambert, Kevin Krieger and Nathan Mauck

To the authors’ knowledge, this paper is the first to use Detail I/B/E/S to study directly the timeliness of security analysts’ next-year earnings-per-share (EPS…

Abstract

Purpose

To the authors’ knowledge, this paper is the first to use Detail I/B/E/S to study directly the timeliness of security analysts’ next-year earnings-per-share (EPS) estimates relative to the SEC filings of annual (10-K) and quarterly (10-Q) financial statements. Although the authors do not prove a causal relationship, they provide evidence that the average time from firms’ filings of 10-Ks and 10-Qs to the release of analysts’ annual EPS forecasts during short timeframes (for example, 15-day timeframe from a 10-K’s SEC file date) subsequent to the 10-K and 10-Q filing dates significantly shortened with XBRL implementation and then remained relatively constant following implementation.

Design/methodology/approach

Using filing dates hand-collected from the SEC website for 10-Ks during 2009-2011 and filing dates for 10-Ks and 10-Qs during 2003-2014 input from Compustat along with analysts’ estimated values for next year EPS, actual estimated next year EPS realized and estimate announcement dates in Detail I/B/E/S, the authors study the days from 10-K and 10-Q file dates to announcement dates and the per cent errors for individual estimates during per- and post-XBRL eras.

Findings

The authors find that analysts are announcing next-year EPS forecasts significantly more frequently and in significantly shorter time in zero to 15 days immediately following 10-K and 10-Q file dates post-XBRL as compared to pre-XBRL. However, the authors do not find a significant change in forecast accuracy post-XBRL as compared to pre-XBRL.

Research limitations/implications

Because this study uses short timeframes immediately following the events (filings of 10-Ks and 10-Qs), the relationship between 10-Ks and 10-Qs with and without XBRL and improved forecast timeliness is strengthened. However, even this strengthened difference-in-difference methodology does not establish causality. Future research may determine whether XBRL or other factors cause the improved forecast timeliness the authors’ evidence.

Practical implications

This improved efficiency may become critical if financial statement reporting expands as a result of new innovations such as Big Data and continuous reporting. In the future, users may be able to electronically connect to financial statement data that firms are maintaining on a perpetual basis on the SEC website and continuously monitor and analyze the financial statement data dynamically in real time. If so, then unquestionably, XBRL will have played a critical role in bringing about this future innovation.

Originality/value

Whereas previous studies have utilized Summary IBES data to assess the impact of XBRL on analyst forecasts, the authors use Detail IBES to study the effects of XBRL adoption directly by measuring days from 10-K and 10-Q file dates in Compustat to each estimate’s announcement date recorded in IBES and by computing the per cent error using each estimate’s VALUE and ACTUAL recorded in Detail IBES. The authors are the first to evidence a significant shortening in average days and an increase in per cent of 30-day counts in the zero- to 15-day timeframe immediately following the fillings of 10-K s and 10-Qs.

Details

International Journal of Accounting & Information Management, vol. 27 no. 1
Type: Research Article
ISSN: 1834-7649

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Article
Publication date: 4 November 2019

Rimona Palas and Amos Baranes

The Securities Exchange Commission mandated eXtensible Business Reporting Language (XBRL) filing data provide immediate availability and easy accessibility for both…

Abstract

Purpose

The Securities Exchange Commission mandated eXtensible Business Reporting Language (XBRL) filing data provide immediate availability and easy accessibility for both academics and practitioners. To be useful, this data should provide information for decisions, specifically, investment decisions. The purpose of this study is to examine whether the XBRL database can be used with models, developed in previous studies, predicting the directional movement of earnings. The study does not attempt to examine the validity of these models, but only the ability to use the data in the analysis of financial statements based on these models.

Design/methodology/approach

The study analyzes New York Stock Exchange companies’ XBRL data using a two-step logistic regression model. The model is then used to arrive at the directional movement of earnings between current and subsequent quarters. Additional models are created by dividing the sample into industry membership.

Findings

The results classified companies as realizing an increase or a decrease in earnings. The final model indicated a significant ability to predict earnings changes, on average about 65 per cent of the time, for the entire model, and 71 per cent, for the industry-based models (higher than those of previous studies based on COMPUSTAT). The investment strategy created average quarterly return between 2.8 and 10.7 per cent.

Originality/value

The originality of this study is in the way it examines the quality of XBRL data, by examining whether findings from prior research which relied on traditional databases (such as COMPUSTAT) still hold using XBRL data. The use of XBRL allows not only easier and less-costly access to the data but also the ability to adjust the models almost immediately as current information is posted, thus providing a much more relevant tool for investors, especially small investors.

Details

Accounting Research Journal, vol. 32 no. 4
Type: Research Article
ISSN: 1030-9616

Keywords

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