Disclaimer The SEC as a matter of policy disclaims responsibility for any private publication or statement by any of its employees. The views expressed in this presentation are those of Joan E. McKown and are not necessarily shared by the Commission or its staff.

Today’s Topics Overview of Commission Actions –FY 2005 New Initiatives Criminal Cases

Annual Caseload by Fiscal Year

FY 2005 Statistics  630 Total Cases  Largest categories  Financial fraud and issuer reporting ( 29%)  Broker-Dealer (15%)  Offering fraud (9%)  Investment Adviser/IC/Transfer Agents (16%)  Insider Trading (8%)  Market Manipulation (7%)  Fair Funds – over $5.4 billion

Financial Reporting and Issuer Disclosure Actions  FY cases  FY cases  FY cases  FY cases  FY cases  FY cases  FY cases

O & D bars  Sought orders barring defendants and respondents from serving as officers or directors of public companies.  FY  FY  FY  FY  FY  FY

Executive Compensation Chairman Cox has repeatedly expressed concern about executive compensation being properly reported “it is important that we stay up to date and even more important that investors and consumers have all the information they need in order to obtain the best possible services from executives and managers at the lowest possible price. Over time, the prevalent forms of compensation have migrated away from what is transparent to what is opaque. In many cases, the lion’s share of an executive’s compensation might come in forms that almost entirely elude disclosure. That clearly needs to be addressed.”

Executive Compensation and Self-Dealing Cases Tyson- company paid $1.5 million penalty -Don Tyson’s penalty - $700,000 executive compensation not disclosed properly Company made misleading disclosures of perquisites and personal benefits provided to Don Tyson, his wife, daughters and 3 other close friends Personal use of company jet Purchases of oriental rugs, vacations, horse, theater tickets, automobiles Company failed to maintain adequate internal controls over his personal use of company assets and disclosure of these perks in its proxy statements Don Tyson signed the annual reports that incorporated the proxy statements and was a cause of company’s disclosure failures

Disclosure to Shareholders (cont) Numbers Right but Disclosure Incomplete  Coca-Cola- (April 2005) Numbers OK buy MD&A failed to disclose end of period practices that impacted the company’s likely future operating results  Elan (Feb 2005) - $15 million penalty- Elan failed to disclose certain transactions that were critical to Elan’s perceived success. As a result, investors were led to believe that Elan had achieved record results through improvements in the company’s business --- when in actuality revenue was generated by selling partial royalty rights to some of its most important products and by selling off other drug product lines entirely

Personal Responsibility Recent Actions Against Corporate Officers and Directors

Recent Financial Reporting and Issuer Disclosure Cases  Qwest – CEO Joseph Nacchio, former co-chairman and CEO and 8 individuals  Time Warner – CFO- Wayne Pace; Controller – James Barge; and Deputy Controller- Pascal Desroches  Bristol-Myers- Frederick Schiff and Richard Lane  Tyson- Don Tyson  WorldCom – former CEO Bernard Ebbers and Scott Sullivan  Kmart – former CEO Charles Conaway and former CFO John McDonald  Homestore.com – former CEO Stuart Wolff and former VP Peter Tafeen  TV Azteca – 3 current and former officers and directors  IMPATH, Inc. – 7 former executives  Global Crossing – Thomas Casey –former CEO, Dan Cohrs- former CFO and Joseph Perrone- former Exec VP of Finance

Focus on Gatekeepers First Line of Defense Auditors Lawyers Board of Directors

 Look hard at the responsibility of the company’s independent directors  Continue to focus closely in our investigations on whether outside directors have lived up to their role as guardians of the shareholders they serve

Corporate Governance  Post investigation, Commission takes a look at the shape of company  Lingering issues are handled by settlements that include undertakings that specifically address the violative conduct  Greater Board Involvement

Goals of New Initiatives  Anticipate risk  Create greater deterrence  Change corporate culture and tone at the top

Coordination with Criminal Authorities  In FY 2004, Commission coordinated with  28 U.S. Attorney’s Offices and 9 state prosecutors  on 108 indictments or informations for 150 individuals and 6 entities  verses 64 indictments or informations in 1999  Corporate Fraud Task Force