Corporate Governance

Communicating with the Division of Enforcement (Part 5)

By J. Robert Brown

We recently discussed the Report issued by the SEC's Inspector General that addressed communication between top officials and Morgan Stanley about the status of an insider trading investigation against John Mack, who eventually became the financial institution's CEO.  The Report discussed a comment made by Linda Thomsen, the Director of the Division, where she told a Morgan Stanley official that there was "smoke but no fire."  The Inspector General referred the matter to the Chairman for possible disciplinary action.

While understanding the sensitive nature of communications about the status of an investigation, we noted that the comment made by Ms. Thomsen was a proper use of her discrection and, frankly, the right thing to do.  We are pleased to see that an adminsitrative law judge at the SEC agrees.  In concluding that no disciplinary action was necessary, the Chief Judge found that "[t]here are no indications that Thomsen's disclosure was committed maliciously or for gain, or was frequently repeated."

Full post as published by The Race to the Bottom on November 09, 2008 (boomark / email).