On April 8-9, 2019, the SEC held its annual SEC Speaks conference in Washington, D.C., which featured remarks from the Chairman and Commissioners, discussions regarding current enforcement initiatives and priorities for the upcoming year and an update on litigation and legislative developments.
Highlights from this year’s conference included:
• Chairman and Commissioner Speeches. Chairman Jay Clayton summarized the SEC’s work over the past year, emphasizing the SEC’s three-part mission to protect investors, maintain fair and efficient markets and facilitate capital formation. He discussed factors and trends impacting the SEC’s operations and highlighted the SEC’s recent victory in Lorenzo v. SEC as well as the SEC’s enhanced disclosure requirements for broker-dealers and investment advisers. Commissioner Robert J. Jackson Jr. discussed key topics which have received SEC attention over the past 15 months, including Regulation Best Interest, market structure, shareholder voting and cybersecurity. He also noted areas for reevaluation and possible regulatory update, including insider trading, Form 8-K reporting and compensation disclosure. Commissioner Hester M. Peirce discussed how staff-level guidance can provide valuable assistance to market participants, highlighting the value of no-action letters, and noting difficulties that arise when staff guidance is not made public. Commissioner Elad L. Roisman discussed recent efforts of the SEC to alleviate challenges and facilitate the IPO process for small companies.
• Enforcement Trends and Priorities Relating to Retail Investors. Conference participants discussed the Retail Strategy Task Force’s focus on affinity fraud, the Division of Enforcement’s Share Class Selection Disclosure Initiative, the Division of Enforcement’s actions in connection with the improper diversion of municipal bonds from retail investors to broker-dealers and areas of focus for the Complex Financial Instruments Unit, which included an increased focus on protecting retail investors in light of increasingly complex products, including certain types of ETFs.
• Use of Data Analytics by the Division of Enforcement. Conference participants discussed the technology used by the Complex Financial Instruments Unit, the use of data analytics at the Division of Enforcement, the importance of blue sheets for detecting violations of the securities laws and the Retail Strategy Task Force’s use of data analytics to understand patterns within certain demographic groups and to study how such groups are impacted by specific types of fraud.
• Cooperation. Conference participants discussed the importance of cooperation in SEC settlement orders, the types of cooperation credit that can be earned, the Division of Enforcement’s use of cases to send messages about the benefits of cooperation and the benefits of self-reporting.
• Miscellaneous Enforcement Priorities and Trends. Conference participants discussed the significance of publiccompany financial fraud cases, themes of the SEC’s Foreign Corrupt Practices Act-related enforcement actions, the focus by the Market Abuse Unit on the accuracy of representations made in the areas of exchanges, alternative trading systems and dark pools, the types of cases that were brought within the last year by the Cyber Unit, including in connection with initial coin offerings, exchange registration, broker-dealer registration and crypto fund registration, the FCPA Unit’s continued commitment to coordinating with both domestic and international law enforcement partners and the importance of cross-border enforcement cooperation and cross-border supervisory cooperation.
• Litigation Developments. Conference participants discussed Lorenzo v. SEC, its resolution of fraud issues surrounding subsections (a) and (c) of Rule 10b-5 and its impact on the Supreme Court’s decision in Janus Capital Group v. First Derivative Traders, developments in insider trading law, including the decision in United States v. Martoma, as well as developments in civil penalties for insider trading, including the decision in SEC v. Rajaratnam, the impact of Kokesh v. SEC on the statute of limitations for claims seeking disgorgement and other issues surrounding disgorgement by the SEC, recent challenges to Rule 30e-3, which allows qualified mutual funds to distribute most shareholder reports online, and challenges to the appointment of administrative law judges by the SEC.
A discussion of highlights from the 2019 SEC Speaks conference with a focus on litigation and enforcement trends is available at: https://www.vedderprice.com/highlights-from-sec-speaks-2019