## Facts

- World-Wide Coin Investments, Ltd. (World-Wide) was a publicly traded corporation engaged in selling rare coins and precious metals.
- World-Wide’s securities were registered with the SEC, making it subject to the accounting provisions of Exchange Act § 13(b), added by the Foreign Corrupt Practices Act (FCPA).
- After changes in management around mid-1979, the company’s accounting and inventory practices deteriorated.
- An independent audit reported that World-Wide lacked safeguards to protect its metals inventory: employees could access metals, and the company did not reliably require contemporaneous records when inventory was removed from the vault.
- The audit also reported that World-Wide’s accounting records were in disarray, producing inaccurate or incomplete financial data.
- The SEC filed an enforcement action against World-Wide and individual defendants Joseph H. Hale and Floyd W. Seibert, alleging violations of the federal securities laws, including the FCPA/Exchange Act § 13(b) books-and-records and internal-accounting-controls requirements.
- Based on the evidence of deficient controls and inaccurate recordkeeping (and related alleged disclosure and reporting violations), the SEC sought permanent injunctive relief and additional equitable relief, including an independent accounting and remedial disclosures to shareholders.

## Issues

1. Whether World-Wide and the individual defendants violated Exchange Act § 13(b)(2)(A) by failing to make and keep books, records, and accounts that, in reasonable detail, accurately and fairly reflected transactions and dispositions of assets.
2. Whether World-Wide and the individual defendants violated Exchange Act § 13(b)(2)(B) by failing to devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances about authorization, recording, and accountability for assets.
3. Whether the SEC was entitled to permanent injunctive relief and related equitable remedies in light of the violations and the risk of future violations.

## Decision

- The court entered judgment for the SEC on all counts.
- The court found that World-Wide’s lack of inventory safeguards and disorderly accounting records failed to meet § 13(b)’s books-and-records and internal-controls requirements.
- The court rejected the contention that limited resources excused noncompliance; the statutory standard requires controls that provide “reasonable assurances,” not perfect controls.
- The court granted permanent injunctive relief.
- The court ordered ancillary equitable relief, including retention of an independent auditor to conduct a full accounting, corrective disclosure to current shareholders about material operational information since July 1, 1979, and the return to World-Wide of any World-Wide shares held by Hale and Seibert.

## Legal Principles

- Exchange Act § 13(b)(2)(A) requires an issuer to keep books, records, and accounts that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; practices that yield inaccurate or incomplete financial data can violate this requirement.
- Exchange Act § 13(b)(2)(B) requires an issuer to maintain internal accounting controls that provide reasonable assurances that: transactions are executed with management authorization; transactions are recorded as needed for reliable financial reporting; and access to assets is allowed only with authorization.
- “Reasonable assurances” is a reasonableness standard; it does not demand error-free results, but it does require controls and recordkeeping adequate for the issuer’s operations.
- Company size and complexity may be considered in assessing what is reasonable, but an issuer is not excused from § 13(b) compliance because it is small or claims it lacks resources.
- In SEC enforcement actions, a demonstrated pattern of recordkeeping failures and control breakdowns can justify injunctive relief and tailored equitable remedies designed to restore reliable reporting and accountability.

## Conclusion

SEC v. World-Wide Coin Investments held that a public company’s failure to safeguard inventory and maintain orderly accounting records can violate Exchange Act § 13(b)’s FCPA accounting provisions, and it approved strong equitable remedies—an injunction, an independent accounting, and corrective shareholder disclosure—to address the violations and reduce the risk of recurrence.


SEC v. World-Wide Coin Investments, Ltd., 567 F. Supp. 724 (1983)