In an effort to gain more trust from the public in 2022, the Division of Enforcement Director, Gurbir Grewal is going for all possible targets and bringing harsher sanctions and higher penalties. In his SEC speech he states, “I believe more is required. Because despite all of the strong enforcement actions the SEC has brought over the years and despite all the speeches that SEC Chairs, Commissioners, Enforcement Directors, and others have given at events like this one, the types of behavior described in the headlines I read to you persist, and as a result, a significant part of the public continues to feel that our markets are essentially a game that is rigged against them.”
In general, some areas being brought to attention are bringing order to crypto trading, holding corporations as well as gatekeepers more accountable, and bringing insider trading back to the forefront.
Cryptocurrency and Cybersecurity
SEC Chair Gary Gensler stated that “Right now, we just don’t have enough investor protection in crypto. Frankly, at this time, it’s more like the Wild West.” and goes on to state “This asset class is rife with fraud, scams, and abuse in certain applications. There’s a great deal of hype and spin about how crypto assets work. In many cases, investors aren’t able to get rigorous, balanced, and complete information. If we don’t address these issues, I worry a lot of people will be hurt.” Protection of these assets comes in the form of more comprehensive and stronger cybersecurity practices across the marketplace.
For compliance departments, it is important to strictly adhere to rules set by the SEC and not just “check the box.” Regarding this, Grewal says, “Rules are not just “check the box” exercises for compliance departments; they are important to ensure that the SEC and other law enforcement agencies can understand what happened and make appropriate prosecutorial decisions. When that doesn’t happen, there can and should be consequences.” It is clear that the SEC is not afraid of imposing more extreme sanctions, as Grewal states, “Officer and Director bars, likewise, are a critical tool in our efforts.”
With the focus shifted to other issues in previous years, there are plans to make a return to more strict enforcement in this area. The SEC has even begun expanding the scope they are willing to pursue under “shadow trading,” of which, one biopharmaceutical company has already been charged. Gensler is also aware of Rule 10b5-1 shortcomings, stating that the 10b5-1 plans (which allow for an affirmative defense to corporate insiders who make predetermined securities trades under the Rule) currently “lead to real cracks in our insider trading regime.”
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