Wildcatting Definition

What is the wildcat?

Wildcatting informally designates a practice instituted by the Security and Exchange Commission (SEC) which calls for the review of an entire industry whenever critical issues are detected in one or two companies in that industry.

Key points to remember

  • Wildcatting informally refers to a practice instituted by the SEC that calls for the review of an entire industry whenever critical issues are detected in one or two companies in that industry.
  • Wildcatting is a term used in the oil industry, where companies drill test wells for oil in unexplored or wild areas.
  • Wildcatting emerged after the Sarbanes-Oxley Act of 2002, which offered greater transparency to investors.

Understanding the Wildcat

The SEC can investigate a number of critical issues with a particular company, including accounting irregularities, executive compensation, and the use of derivatives trading, and turn that investigation into an investigation of other companies in the same industry. .

This term is derived from the oil industry, where companies drill test wells for oil in unexplored or wild areas. The intent of this practice as it relates to the securities industry is to probe industries or practices about which the SEC has concerns, even if there is no clear indication of wrongdoing. As part of this initiative, the SEC has conducted investigations of many industries, including the oil, cable television, and video game industries. This policy appeared after the Sarbanes-Oxley Act of 2002, which offered greater transparency to investors.

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