Abstract

The recently enacted Securities Enforcement Remedies and Penny Stock Reform Act of 1990 provides that, in an SEC enforcement action, a federal court may enjoin or "disbar" the defendant from serving in the future as an officer or director of a public company. A court may enter such an order if it finds that the defendant is "substantially unfit" to serve as a corporate executive; the Act, however, does not define "substantial unfitness." In this Article Professor Jayne Barnard provides a framework for defining this term and identifying the defendants to which the Remedies Act should apply. Professor Barnard begins by looking at the legislative history of the Act, but finds little guidance there. She then examines three lines of non-Act cases in which courts have addressed questions closely related to the question of executive unfitness. She rejects these models as well as a fourth, which derives from a British statute similar to the Act. Looking at the standards for imposition of other types of injunctions under the securities laws, and taking into account current criminological knowledge concerning white-collar recidivism, Professor Barnard concludes by establishing a seven-factor test to define "'substantial unfitness" under the Act.

Document Type

Article

Publication Date

1992

Publication Information

70 North Carolina Law Review 1489-1522 (1992)

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