SEC Commissioner Raises Concerns Over “Information Bundling”


In a public statement issued on September 3, 2021, SEC Commissioner Caroline Crenshaw raised concerns about the SEC’s longstanding practice of considering corporate benefits when assessing penalties against corporate wrongdoers.  Crenshaw’s statement, published on the heels of the SEC’s announcement of an enforcement action against Kraft Heinz Co., discussed the risk of limiting penalties to benefits that are easily quantifiable, which could leave the company in a “potentially better economic position for having committed the violation.” 

Crenshaw highlighted the Kraft Settlement as an example of how companies engage in “information bundling” by strategically releasing multiple pieces of negative information at the same time, thus making it difficult to determine what portion of its stock drop was a result of the company’s potential SEC violations versus other significant issues.  Commissioner Crenshaw also referenced a recent study which found that information bundling “results in dramatically fewer successful recoveries by private securities litigants who, unlike the SEC, must prove that corporate stock price losses were directly attributable to the specific bad news.”  

In closing, Crenshaw reiterated her view that when assessing corporate penalties, the SEC should focus more heavily on other factors, such punishing misconduct and deterring future misconduct.
 

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About Nina Varindani

Nina Varindani is a Partner in Faruqi & Faruqi, LLP's New York office and focuses her practice on securities litigation and shareholder derivative litigation, representing investors in federal and state class action and derivative lawsuits, books and records demands and litigation demands.

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