Tuesday, September 29, 2020
On September 17, 2020, Stephanie Avakian, Director of the SEC’s Division of Enforcement, spoke on the Institute for Regulation and Economics, College of Pennsylvania Carey Regulation College Digital Program. Ms. Avakian used her time to focus on the Division’s enforcement priorities, operations, and challenges within the years since Jay Clayton grew to become the director of the SEC in Could 2017.
When it comes to priorities, Ms. Avakian confirmed that the Division’s focus has been on six sorts of “impactful” instances: (1) monetary fraud and issuer disclosures; (2) misconduct by registrants that negatively impacts the integrity of the markets; (3) insider buying and selling; (4) Overseas Corrupt Practices Act; (5) Ponzi schemes and providing frauds, and (6) unregistered and/or fraudulent preliminary coin choices. The Division has additionally made a concerted effort to carry people accountable for wrongdoing, and Ms. Avakian famous that roughly 70% of enforcement instances embody fees towards “registered people, executives in any respect ranges of the company hierarchy, together with CEOs, CFOs and different high-ranking executives, in addition to gatekeepers resembling accountants, auditors, and attorneys.”
When it comes to operations, the Division has labored to maximise effectivity and its effectiveness in a variety of methods:
Proactively figuring out instances by publicly accessible info, together with the issuer’s personal statements, filings, and market and trade commentary;
Implementing disclosure initiatives to encourage self-reporting in trade for favorable standardized settlement phrases;
Growing effectivity in inside processes, such because the Distributions Group and the Whistleblower Program;
Delegating low-priority instances to Workplace of Compliance, Inspections and Examinations (OCIE) to bear examination (i.e., instances involving conduct that was extra appropriately dealt with by the examination course of);
Offering vital credit score to those that cooperate with the SEC and messaging the advantages of cooperation;
Tailor-made treatments that deal with particular dangers and reduce potential hurt to traders.
As for challenges, Ms. Avakian recognized three sources of issue for the SEC: (1) Supreme Court docket selections; (2) the 2018-2019 authorities shutdown, and (3) COVID-19. Three latest Supreme Court docket selections considerably impacted the SEC’s enforcement operations. The Lucia v. SEC, 138 S.Ct. 2044, 2055 (2018) ruling (SEC administrative regulation judges are “officers” pursuant to Article II of the Structure and due to this fact have to be appointed by the pinnacle of the SEC) remanded roughly 200 instances, every of which the Division needed to reevaluate and, in some instances, retry. Kokesh v. SEC, 137 S. Ct. 1635, 1639 (2017) (see our prior weblog put up right here), which positioned a five-year limitations interval on disgorgement orders, precluded the SEC from disgorging nearly $1.1 billion and compelled the Division to reassess disgorgement in lively instances. Lastly, the additional limitations on disgorgement imposed by Liu v. SEC, 140 S.Ct. 1936, 1945-6 (2020) (see our prior weblog put up right here), would require the Division to rebalance the penalties and disgorgement it seeks and recommends to the SEC. As well as, the five-week authorities shutdown in early 2019 and the present COVID-19 pandemic have additional impacted the Division’s capacity to take care of and maintain regular operations. Ms. Avakian famous, nevertheless, that the SEC suspended buying and selling in 36 issuers that made suspicious or inaccurate COVID-19-related claims and has initiated 5 COVID-19-related fraud actions.
Regardless of these challenges, the Division’s enforcement statistics for the final three years are remarkably in keeping with these from the previous three years below Chairman Clayton’s predecessor, Mary Jo White. In accordance with its annual experiences, the SEC introduced 1,462 standalone enforcement actions between 2017 and 2019 and obtained $12.08 billion in monetary treatments. Between 2014 and 2016, below Chairman White, the SEC introduced 1,468 standalone enforcement actions and obtained no less than $12.35 billion in disgorgement and penalties ordered. Moreover, Ms. Avakian famous that 2020 stood to be one other record-breaking yr by way of monetary treatments, exceeding 2019’s $4.Three billion, which on the time was the best the SEC had ever obtained in a single yr. All issues thought of, and regardless of many odds, it seems to be enterprise as standard on the SEC.
 See Division of Enforcement Annual Report 2019.
 See October 11, 2016 Press Launch saying Enforcement Outcomes for FY 2016.
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