July 27, 2021
SEC Enforcement: Early Returns From the “New Regime”
We’re 6 months in to the Biden regime – and even though Gurbir Grewal just officially joined the Commission as the Director of the Division of Enforcement yesterday, it’s been quite a year already. And, every indication is that more scrutiny is expected going forward. This 21-page Gibson Dunn memo recaps trends & significant cases in the first half of the year. Here are some of the biggies:
1. Climate & ESG Task Force – charged with developing initiatives to identify ESG-related misconduct and analyzing data to identify potential violations. Additionally, the task force aims to identify misstatements in issuers’ disclosure of climate risks and to analyze disclosure and compliance issues related to ESG stakeholders and investors.
2. SPACs – A string of pronouncements in the spring was followed by announcement of the first enforcement action earlier this month.
3. Cybersecurity Enforcement Sweep
4. Shifting Approach to Corporate Penalties – In March, SEC Commissioner Caroline Crenshaw criticized the SEC’s 2006 guidance on its approach to penalties. Gibson Dunn notes that if the Commission is no longer following the 2006 guidance, then untethered from a consideration of corporate benefit or shareholder cost-benefit, the Commission’s posture on corporate penalties is vulnerable to subjective assessments of egregiousness and corporate cooperation. Moreover, unlike calculations under the US Sentencing Guidelines, there is no public disclosure of exactly how the SEC reaches a particular penalty, leaving companies and counsel unable to understand the basis for any negotiated penalty amount.
5. Discovery of Staff Positions – In recent litigation, defendants have been able to get internal Staff documents and even depose former Corp Fin Director Bill Hinman.
6. Whistleblower Awards – Coming in at a record pace.
– Liz Dunshee