In a September 25, 2017 press release (which may be found here, the SEC announced two new initiatives from its Enforcement Division:
- the establishment of a retail strategy task force targeting issues directly affecting retail investors; and
- the creation of a "cyber unit" that will focus on targeting cyber-related misconduct.
Retail Strategy Task Force
This new task force will develop initiatives relating to the protection of retail investors, including unsuitable structured product sales and "pump-and-dump" schemes.
The SEC indicated that the task force will apply the lessons learned from prior cases, and leverage the SEC's data analytics and technology to identify large-scale misconduct that affects retail investors. The task force will include enforcement personnel from around the U.S., and will work with staff across the SEC, including from the SEC's National Exam Program and its Office of Investor Education and Advocacy. The new task force is the latest step in the SEC's long running focus on how improper sales of complex products and other practices can harm individual investors.
In remarks on October 26, 2017, the SEC's Co-Director of the Division of Enforcement, Stephanie Avakian, noted that:
- the retail ambit includes not only items such as Ponzi schemes and microcap or offering fraud, but is also focused on "conduct that occurs at the intersection of investment professionals and retail investors";
- the enforcement staff sees extensive and widespread examples of misconduct, such as:
o problems in the sale of structured products to retail investors, including a failure to fully and clearly disclose fees, mark-ups, and other factors that can negatively impact returns;
o recommending and trading in wholly unsuitable strategies and products, including investors buying and holding products such as inverse ETFs for long-term investment;29
- the task force's mandate will include a focus on investor education and outreach; and
- the focus on retail investors does not mean that the SEC will reduce its scrutiny of large Wall Street institutions, and the task force will focus on market participants of all sizes.
This new unit will target cyber-related misconduct, including:
- Market manipulation schemes involving false information spread through electronic and social media;
- Hacking to obtain material non-public information;
- Violations involving distributed ledger technology and initial coin offerings; Misconduct perpetrated using the "dark web";
- Intrusions into retail brokerage accounts; and
- Cyber-related threats to trading platforms and other critical market infrastructure.
The creation of this unit reflects the SEC's continuing concerns about how cyber crimes can impact both institutions and retail investors, as discussed in more detail in Chairman Clayton's September 20, 2017 public statement on cyber security.