SEC 2022: Prepare for Novel and More Aggressive Enforcement

Posted On Thursday, January 6, 2022
By: Chalon C. Young

Takeaway:

Be prepared for novel and more aggressive enforcement actions from the SEC in 2022 with a tougher oversight agenda on: first-of-its-kind, insider trading, crypto, targeted individuals, and ESG.


Under new leadership of Enforcement Director Gurbir Grewal, the SEC expects a tougher oversight agenda in 2022, with enforcement priorities possibly even more stringent than they were during the Obama administration.  Below are five types of SEC enforcement actions to expect in the coming year:

  1. First-Of-Its-Kind: The SEC has launched a series of novel legal actions designed to deter misconduct, applying securities law in ways it has not done before.  So far, these actions have included cases against an unregistered broker-dealer involving decentralized finance and a former executive for engaging in “shadow trading” by using confidential information about his own company to trade the stock of a rival firm.  More “firsts” are expected to emerge as the SEC expands and strengthens its enforcement protocols.
  2. Insider Trading: Although SEC enforcement of insider trading decreased last year, expect to see a stricter stance on misuse of non-public information in 2022.  Advancements in market surveillance tools have made it easier to detect insider trading, and the agency is broadening its rules to combat unequal access to information.  Proposed new rules aim to strip protection from corporate executives – whereas executives were previously shielded from insider trading accusations when they buy or sell their own company’s stock, the new rules would expose them to scrutiny.  The SEC has also proposed a rule requiring more frequent and detailed disclosures of corporate stock repurchases. 
  3. Crypto: Possibly the highest priority for the SEC in 2022 is cryptocurrency, with enforcement actions against players in the crypto space escalating under new leadership.  The SEC is firmly against unregistered crypto offerings and will likely begin investigating other areas of crypto for wrongdoing as well.  Additionally, the SEC is focusing more on individual defendants in crypto enforcement actions and is expected to bring an increased amount of these cases.
  4. Targeting Individuals: Whereas previous administrations have focused on settlements with the public company at issue, under current leadership the SEC is expected to target the individuals it labels “gatekeepers.” This group includes accountants, attorneys, auditors, and compliance officers – all of whom have individual accountability.  Holding individuals – not just corporations – accountable is a major change from previous administrations. 
  5. ESG: Environmental, social and governance issues are expected to be higher priorities under the new SEC leadership.  The SEC is expected to sharpen its focus on companies that engage in “greenwashing” – a practice where a company misrepresents the environmental sustainability of its business or products.

Be prepared for more aggressive enforcement actions from the SEC in 2022.  Much is expected from the SEC in the coming year with heightened enforcement priorities. Pietragallo Gordon Alfano Bosick & Raspanti, LLP assists corporations and their leadership in enhancing compliance and in responding to government enforcement actions. We assist clients in all 50 states, the District of Columbia, and abroad. 

Attorneys Beware: Higher Penalties for Enabling Corruption

Posted On Tuesday, December 14, 2021
By: Chalon C. Young

Takeaway:

Attorneys should exercise caution when dealing with issues such as cryptocurrency and shell companies.  Professionals who enable unlawful corporate activity could face harsher penalties under the Biden Administration’s new anti-corruption plan.

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Last week brought a surge of information about the Biden Administration’s newly released Strategy on Countering Corruption.  It appears that no one can evade scrutiny, including attorneys.

Addressing corruption as a national security threat, Biden’s strategy targets corporate misconduct from all angles and emphasizes the role of the professionals who advise and structure corporate transactions. 

The report issued this week identified five “pillars” to combat corruption:

  1. Modernizing and coordinating the government’s existing anti-corruption efforts
  2. Curbing illicit finance
  3. Holding wrongdoers accountable
  4. Strengthening multilateral ties
  5. Harnessing foreign assistance. 

Under the administration’s strategy, professionals such as lawyers and accountants are seen as “gatekeepers” to illicit finance.  The administration is considering harsher penalties for professionals who are complicit in wrongdoing.

What does this mean for attorneys? 

According to the report issued by the Biden Administration, attorneys, accountants, and company incorporators “are not required to understand the nature or source of income of their clients or prospective clients.”  As a result, they “can serve as an access point to the U.S. and international financial systems, including by facilitating the creation of opaque corporate vehicles.”  It is difficult for law enforcement to prove intent and knowledge of attorneys when they are involved with illicit funds. 

The Administration seeks to change this under the anti-corruption strategy issued this week.  Working with Congress as needed, the administration will consider additional oversight to such “gatekeepers,” including increased penalties for malfeasance as well as state-level professional sanctions.

Attorneys should exercise caution when dealing with issues such as cryptocurrency and shell companies – both of which will be subject to closer regulation under the Administration’s new strategy.  The Administration announced it will “refine” regulations to apprehend those who use cryptocurrency to evade SEC jurisdiction, and the Department of the Treasury has proposed establishing a database of beneficial ownership information to help prevent the movement of money through shell companies.  Attorneys should be cautious not to take any action that could be seen as covering up client deficiencies or in any way assisting companies in moving illicit funds.

To read the Fact Sheet published by the White House, click here: https://www.whitehouse.gov/briefing-room/statements-releases/2021/12/06/fact-sheet-u-s-strategy-on-countering-corruption/

Pietragallo Gordon Alfano Bosick & Raspanti, LLP assists corporations and their leadership in enhancing compliance and in responding to government enforcement actions. We assist clients in all 50 states, the District of Columbia, and abroad. 

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