As we noted earlier this month, the SEC has sought to proactively combat fraud related to the coronavirus/COVID-19 pandemic and related economic crisis by suspending the trading of at least eleven different companies since February 7, 2020. On Friday, April 24th the SEC announced another major step in its related efforts to protect investors — the formation of a Cross-Divisional COVID-19 Market Monitoring Group.
According to the SEC, the group is intended to assist the Commission and staff in analyzing “the effects of COVID-19 on markets, issuers and investors—including our Main Street investors” and to work with other regulators and public sector entities such as the President’s Working Group on Financial Markets, the Financial Stability Oversight Council, and the Financial Stability Board. This initiative is broadly linked to Chairman Clayton’s longstanding interest in supporting “the long-term interests of the Main Street investor.”
Continue reading “SEC Announces Next Step in Pandemic Response Efforts, Forms Cross-Divisional COVID-19 Market Monitoring Group”
The SEC has suspended the trading of eleven companies for issues related to the COVID-19 pandemic since February 7, 2020. Of those eleven suspensions, seven have come since April 3rd. Most of the suspensions follow the recent statement from the co-directors of the SEC’s Division of Enforcement that “the Enforcement Division is committing substantial resources to ensuring that our Main Street investors are not victims of fraud or illegal practices in these unprecedented market and economic conditions.” In addition, the SEC this week updated an investor alert about possible investor scams related to the pandemic.
The reasons for the suspensions range from possible confusion about the name of a company to suspicious statements from companies about having “FDA-approved” at-home COVID-19 test kits, supposed new technology for non-contact human temperature screening, or the ability to produce a vaccine or protective gear.
Continue reading “COVID-19: SEC Announces Trading Suspensions and Focuses on Potential Fraud”
As the world is navigating through COVID-19 and as we are focused on our health and well-being as we self-quarantine and engage in social distancing to do our part to stop the spread, our markets remain open, active, and volatile, and the U.S. Securities and Exchange Commission (“SEC”) has recently made clear that they will continue to be an active overseer.
Continue reading “SEC OCIE and Enforcement Are Still Watching”
On March 3, 2020, the Supreme Court heard arguments in the case of Liu v. SEC, No. 18-1501. This article summarizes what transpired at the hearing, in which the arguments centered on a challenge to the ability of the U.S. Securities and Exchange Commission (“SEC”) to obtain disgorgement as an “equitable remedy” for securities law violations.
During the oral arguments, the Justices’ questions indicated that they appeared reluctant to entirely do away with disgorgement, but rather their queries focused on whether limitations should be placed on the SEC’s continuing use of disgorgement as an equitable remedy. Specifically, the Justices expressed interest in exploring parameters and limitations regarding how disgorgement is calculated and whether the SEC or defrauded investors are entitled to any disgorged funds.
Continue reading “SEC Disgorgement: Looking to the Future”
The SEC and DOJ have long prioritized insider trading prosecutions. Moreover, insider trading cases frequently involve parallel investigations in which the SEC and DOJ share information and coordinate efforts to collect evidence in support of civil and criminal litigation. Despite some setbacks that prosecutors have faced in recent years as insider trading case law has evolved, there is no sign that either the SEC or DOJ is backing down from vigorously enforcing the law prohibiting insider trading. We have previously blogged about the recent case law changes and their effect on civil and criminal investigations. The Bharara Task Force on Insider Trading was created in late 2018 and released its report on January 27, 2020.
Continue reading “Could New Legislation on Insider Trading be on its Way?”
According to a White House budget issued on February 10, 2020, the White House is considering transferring the authority of the Public Company Accounting Oversight Board (PCAOB or Board) to the SEC by 2022 in order to eliminate duplication between the two regulators and to “reduce regulatory ambiguity.” See A Budget for America’s Future.
The Sarbanes-Oxley Act of 2002 established the PCAOB as a nonprofit corporation to oversee the audits of public companies in order to protect investors and the public interest by promoting informative, accurate, and independent audit reports. This was done in response to accounting scandals at major companies such as Enron and Worldcom. The SEC has oversight authority over the PCAOB, including the approval of the Board’s rules, standards, and budget. And, of course, the SEC has authority to broadly enforce the securities laws against, among others, auditors of public companies and registered broker-dealers. The PCAOB, however, rather than focusing on the entire range of securities law violations, typically focuses on violations of audit quality standards as embodied in its rules. For example, the PCAOB recently charged Pricewaterhouse Coopers’ Mexican affiliate firm with violating its Rule 3520, which requires a registered public accounting firm to be independent of the firm’s issuer audit clients. See In the Matter of Pricewaterhouse Coopers, S.A., PCAOB Release No. 105-2019-017 (Aug. 1, 2019). Moreover, many of the PCAOB staff members have public auditing experience, often with “Big Four” firms. Although the SEC also hires accountants, the agency would need to ramp up its hiring dramatically if it were to assume the PCAOB’s existing regulatory authority.
Continue reading “Trump Budget Proposes Folding the PCAOB into the SEC by 2022”