The U.S. investment industry welcomed President Bush’s plan to implement stiffer penalties for corporate leaders who knowingly misrepresent their companies’ earnings, saying those who defraud investors should “get the punishment they deserve.”

In his long-awaited speech on corporate responsibilty, Bush asked for a doubling of the maximum jail term for mail and wire fraud, and for generally tougher sentencing guidelines for corporate officers who cheat investors.

North American Securities Administrators Association president Joseph Borg said Bush’s call for tougher penalties for financial fraud were long-overdue. “It’s time to reaffirm the basic principle upon which our markets are built: trust,” Borg said in a news release. “While tougher standards and more prosecutions are cold comfort to those wiped out by the collapse of Enron, Global Crossing, WorldCom and others, real reform — now — could ensure that crooks who scam investors out of their life’s savings get the punishment they deserve.”

Borg noted that self-regulation is not enough. “We need both more cops on the securities beat and tougher prosecutions. NASAA is encouraged that the president suggested steps to achieve both, including the creation of a ‘financial crimes SWAT team’. White-collar criminals should be treated like criminals who commit premeditated crimes — with long sentences and hard time.”

Bush’s proposals, outlined today in a speech to a Wall Street audience in New York, include:

  • doubling the maximum prison term for mail fraud and wire fraud to 10 years;
  • creating a new Corporate Fraud Task Force;
  • empowering the U.S. Securities and Exchange Commission to freeze improper payments to corporate executives while a company is under investigation;
  • ending loans to corporate officers from their companies;
  • preventing corporate officers from profiting from erroneous financial statements;
  • ensuring that corporate officers who clearly abuse their power lose their right to serve in any corporate leadership positions;
  • speeding up the disclosure of insider trading disclosure;
  • strengthening laws that criminalize document shredding and obstruction of justice;
  • improving the disclosure of corporate compensation; and
  • strengthening the SEC by giving the regulator an additional US$100 million in fiscal 2003 to beef up enforcement.



SEC chair Harvey Pitt welcomed the extra US$100 million in enforcement funding. “We are committed to forceful, aggressive, creative, and prudent efforts to revitalize and improve our system,” he said in a news release. “We are proud to let our actions speak for us.”