The Week in Review (August 20-24, 2007): Dog Days and Enforcement Activity

It’s the dog days of summer in Washington, those final days of August when everyone wants to be on vacation as the summer moves to an end. This fact clearly shows in the inventory of cases brought last week by the SEC and its Enforcement Division last week – and perhaps in recent weeks. Last week there were two cases of some note.

SEC v. Byrd, Case No. C-07-4223 WHA (N.D. Ca. Aug 17, 2007). Here, the Commission charged Mr. Byrd, former CFO and COO of Brocade Communications with violations of the antifraud and reporting provisions of the federal securities laws. This case is another based on the conduct the government used in U.S. v. Reyes in which it obtained a conviction of the former Brocade Chairman. The SEC’s Litigation Release regarding the case can be seen at

SEC v. Fife, Civil Action No. 07-CV-347 (N.D. Ill.). Here, the SEC announced the entry of a consent decree in a market timing case. The complaint, filed earlier this year, alleged that the defendants engaged in a fraudulent scheme to purchase variable annuity contracts issued by Lincoln National Life related to market timing. The consent injunction precludes Mr. Fife and Clarion Capital, a dissolved hedge fund, from engaging in future violations of Section 10(b) and ordered the payment of disgorgement, interest and a civil penalty. The SEC’s Litigation Release regarding the case can be seen at

Byrd is one small part of a huge inventory of stock option backdating cases that seem to dribble out of the Enforcement Division at an ever slower pace. Fife is one of what seems to be a long-thought-to-be-ending-but-never-quite-gone inventory of market timing cases that also continue to dribble out. If these are the significant cases of the week, it seems clear that the dog days of summer have come to the enforcement division.

Regardless, one has to wonder about the pace of enforcement activity. Last year, the division brought fewer cases than the year before. Some commentators made much of that fact. The staff dismissed those claims. Yet, the slow dribbling out of the option backdating cases and the never-ending market timing cases at least suggests that enforcement activity, which slowed last year, is even slower this year. If so, the slowing trend and what it says about the vitality of the enforcement program will be hard to dismiss again.