Rule 10B-5 and the “Unfitness” Question

The Sarbanes-Oxley Act provides that, in a litigated proceeding brought by the SEC or in a cease-and-desist proceeding before the SEC, a securities law violator who is found to be “unfit” may be barred from serving as an officer or director of a public company. This Article sets out a roadmap for determining when a violator is “unfit.” Drawing on related areas of the law, and utilizing the Federal Sentencing Guidelines as a framework, the Article sets out a nine-factor test for determining “unfitness,” and discusses the due process issues surrounding the “unfitness” inquiry.