SEC Blasted by Federal Judge Over Settlement Management
Recently, Judge Pauley of the United States District Court for the Southern District of New York harshly criticized the SEC’s management of a private claims administrator, who was hired to distribute funds from a settlement received from the Zurich Financial Services Group.
The fund administrator requested $1 million dollars in fees and expenses for a $25,000,000 settlement fund. Judge Pauley criticized the SEC’s management as to how such expenses could even be incurred. The record indicated that the SEC had conducted no meaningful oversight over the fund’s administrator, and that it had acted “in ostrich like fashion.” Judge Pauley indicated that, for similar securities class action matters, fees were literally half those in this particular case. The SEC was ordered to respond to the court’s criticisms by October 28, 2011, in a decision that denied without prejudice the request for fees and expenses.
Interestingly, the Court allowed the SEC an opportunity to respond to this “calling out” of its administration. We are certain that there will be more to tell of this story when the SEC responds.