Then explains the standards, which really aren’t standards.
The Set-Up
Bankosky was a senior official of a pharmaceutical company. He had inside information on potential deals, and he traded on them.
Aside: As a music student in college, I told my primary professor that I was quitting my music degree and changing my major to pursue a law degree. He replied, “It doesn’t surprise me that people sell out, but how cheaply they do.”
How is this relevant? Bankosky’s illicit trades yielded $63,000.
Among other sanctions, the SEC moved to bar Bankosky permanently from serving as an officer or director of a public company. The court said, “Yep. Sounds good to me.”*
The Arguments
On appeal, the court noted the non-exclusive factors from U.S. v. Patel useful in making an assessment of the offender’s fitness to serve as an officer or director of a public company based on Exchange Act Section 21(d)(2). However, this was before Sarbanes-Oxley, which lowered the standard from “substantial unfitness” to “unfitness.” Results: Fireworks.
Does this mean that Patel no longer applies, as the SEC asked as it was looking for what it considers a more stringent standard? Nope. The court said:
“Moreover, the Patel factors are neither mandatory nor exclusive; a district court may determine that some of those factors are inapplicable in a particular case and it may take other relevant factors into account as it exercises its “substantial discretion” in deciding whether to impose the bar and, if so, the duration, so long as any bar imposed is accompanied with some indication of the factual support for each factor that is relied upon.”
In other words, the court may or may not look at a standard that may or may not apply based on something or other that may have six or seven elements that are probably substantially similar in substance. The court has a lot of discretion when determining what factors to consider in barring someone from acting as a public company director or officer.