November 7, 2022

SEC Enforcement: Gatekeepers in the Crosshairs

Insider trading is just one of the many topics that the SEC’s Enforcement Division is focused on right now, according to a PLI speech last week from SEC Chair Gary Gensler. He noted that all of this activity has added up to massive fines & penalties:

In the fiscal year that just ended on September 30, 2022, we filed more than 700 actions. We obtained judgments and orders totaling $6.4 billion, including $4 billion in civil penalties.

This Reuters article says that’s a record level of collections for the agency. Gensler also had a message for securities lawyers:

You also have a role as gatekeepers in upholding the law.

For instance, today’s event takes place in the State of New York, where the state courts describe the role of attorney as a position of duty, trust, and authority, conferred by governmental authority for a public purpose.

We want you to succeed in meeting these standards of rectitude.

When lawyers—or other gatekeepers, like auditors and underwriters—breach their positions of trust and violate the securities laws, we will not hesitate to take action.

During the recent fiscal year, for example, we charged an attorney for his role in an unregistered, fraudulent securities offering, and we suspended him from practicing before the SEC as an attorney.

We also are litigating an action against an attorney for his alleged role in a would-be pump-and-dump scheme. In addition to other remedies, we seek an injunction to prohibit him from providing legal services regarding securities offers or sales.

These examples may be just a couple of bad apples, but they serve as a reminder to “Just Say No” to any sketchy propositions. Chair Gensler also noted that the SEC has been pursuing auditors and underwriters, in some of the largest and/or first actions of their kind.

Liz Dunshee