Reuters-

When the Securities and Exchange Commission sued six former top officials from the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Association (Freddie Mac) last December, public skepticism toward the cases was plentiful. The two lawsuits, which named three executives from each company, alleged that the defendants misled investors about their firms’ exposure to the risky mortgages.

New York Times columnist Joe Nocera called the lawsuits “extraordinarily weak,” noting the lack of gotcha emails or evidence of potential insider trading by the defendants. On the Case columnist Alison Frankel was also dubious. She noted that even though the cases centered on the lack of adequate disclosures, the SEC had charged four of the defendants with securities fraud.

“That’s a high bar, in which the agency has to show the defense acted with fraudulent intent,” wrote Frankel.

We now have a better understanding of how the SEC intends to clear that hurdle…

[REUTERS ON THE CASE]

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