Regulatory Enforcement

It arguably is not news that the SEC is monitoring disclosure and related issues concerning ESG. After all, the agency’s enforcement division formed an ESG Task Force in March 2021. And as discussed here, the Task Force recently launched its first ESG disclosure-related enforcement action. Now, in the Task Force’s latest move, the agency charged an investment advisor with securities law violations related to the advisor’s claims that its fund investments had undergone ESG quality review, even though that was not always the case. BNY Mellon Investment Adviser, Inc., the investment adviser involved, agreed to pay a $1.5 million penalty to settle the charges. As discussed below, this latest Task Force action underscores the fact that the ESG cops are on the beat, and they are actively monitoring ESG-related disclosures. That could have important implications for future SEC enforcement activity.
Continue Reading Attention: The ESG Cops Are On The Beat

Nikola, the electric vehicle company that became a publicly traded company through a June 3, 2020 merger with a SPAC, has reached an agreement to pay $125 million to settle proceedings the SEC brought against the company relating to misrepresentations its former CEO Trevor Milton and the company made about the company’s EV production capabilities. In the settlement, the company neither admitted nor denied the SEC’s allegations. The SEC’s December 21, 2021 press release about the settlement can be found here. The SEC’s December 21, 2021 order instituting cease and desist proceedings against Nikola can be found here. The company’s December 21, 2021 press release about the settlement can be found here.
Continue Reading Nikola Settles SEC Proceedings for $125 Million

In a post last week, I noted that in FY 2021 the SEC had flied fewer enforcement actions against public companies compared to FY 2020. However, according to the SEC’s recently released fiscal year end enforcement activity report, the number of new enforcement actions overall (that is, inclusive of both public and private companies) increased by 7 percent in FY 2021. The SEC’s November 15, 2021 press release detailing the agency’s enforcement statistics can be found here. The enforcement action statistical breakdown for FY 2021 can be found here.
Continue Reading New SEC Enforcement Actions Overall Increased in FY 2021

According to the latest report from the NYU Pollack Center for Law & Business in conjunction with Cornerstone Research, SEC Enforcement Activity against publicly traded companies and their subsidiaries declined in fiscal year 2021 (which ended on September 30, 2021) relative to recent years as well as relative to fiscal year 2020. Monetary recoveries were in aggregate greater in FY 2021 relative to FY 2020. The report, entitled “SEC Enforcement Activity: Public Companies and Subsidiaries: Fiscal Year 2021 Update” can be found here. Cornerstone Research’s November 17, 2021 press release about the report can be found here.
Continue Reading Public Company SEC Enforcement Activity Declined in FY 2021

From the outset of his time in office, SEC Chair Gary Gensler has made it clear that establishing oversight of crypto assets represent one his priorities. In a speech last week, Gensler said that agency will be “very active” in bringing digital currency under its investor protection framework, saying further that the digital assets will not mature if they are not brought under broad regulatory oversight. The regulator’s position is not restricted to mere words; a recent report shows that the agency has indeed been active in asserting its cryptocurrency oversight through enforcement actions. According to a recent report from Cornerstone Research, the agency has bought 19 enforcement actions related to cryptocurrency in the first nine months of 2021. The report, entitled “SEC Cryptocurrency Enforcement: Q3 2021 Update,” can be found here.
Continue Reading SEC Enforcement Activity Targets Crypto Assets

The standard view of the Biden Administration SEC under the leadership of Gary Gensler is that the agency will take a more active enforcement approach than was the case during the prior administration. Two developments in the past few days certainly support this standard view. First, in a speech last week, new SEC Enforcement Division Director Gurbir Grewal indicated that the agency will be requiring admissions of wrongdoing in some enforcement settlements. Second, in a statement the next day, SEC Chair Gensler announced that the agency would revitalize the rulemaking process with respect to rules regarding clawbacks of erroneously awarded compensation. As discussed below, these moves evidence a more aggressive approach to the enforcement of the securities laws. The text of Grewal’s October 13, 2021 speech can be found here. Gensler’s October 14, 2021 statement about the compensation clawback rules can be found here.
Continue Reading SEC Moves on Admissions and Compensation Clawbacks Underscore Tougher Enforcement Approach

As I discussed in a post at the time (here), in August 2021 the SEC brought an cybersecurity-related disclosure enforcement action against UK educational publishing firm Pearson plc. In the following guest post, Paul Ferrillo, Daphne Morduchowitz and James Billings-Kang take a detailed look at the Pearson enforcement action and discuss the action’s implications. Paul and Daphne are partners and James is an associate at the Seyfarth Shaw law firm. I would like to thank the authors for allowing me to publish their article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to this blog’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.
Continue Reading SEC Ramps Up Its Cyber-Security Enforcement in Pearson Matter

From the outset, it has been clear that certain issues are going to be top-of-the-agenda items for the Biden Administration, including, for example, climate change, diversity and inclusion, and cybersecurity. In a July 9, 2021 Executive Order (here), the White House made it clear that competition is also going to be a priority as well. The President’s Executive Order sets out a broad range of initiatives that will impact a wide array of industries across the American economy. As discussed below, the new Executive Order has important implications for companies and their executives; among other things, the initiatives proposed in the order could lead to heightened D&O claims risk and exposure.
Continue Reading New Executive Order Means Increased Regulatory Action and Increased Follow-on D&O Claims Risk

As I noted at the time, earlier this month the SEC released its enforcement activity report for the fiscal year ending September 30, 2020. While the report fully detailed the agency’s enforcement activity, the report did not break out statistics reflecting the SEC’s actions against publicly traded companies. A November 18, 2020 report from Cornerstone Research, written in collaboration with the NYU Pollack Center for Law & Business, entitled “SEC Enforcement Activity: Public Companies and Subsidiaries Fiscal Year 2020 Update” (here), takes a detailed look at SEC enforcement activity involving publicly traded companies and their subsidiaries during FY 2020.

As was the case with enforcement activity overall, enforcement activity involving publicly traded companies declined during FY 2020 due to the impact of the coronavirus outbreak, but after a sharp drop in activity during the first half of the fiscal year, enforcement activity rebounded toward the end of the second half. The agency’s $1.6 billion in public company monetary settlements slightly exceeded the equivalent figures for FY 2019. Cornerstone Research’s November 18, 2020 press release about the report can be found here.
Continue Reading SEC Public Company Enforcement Actions Decreased in FY 2020, But Recoveries Increased

Now that the Presidential election has been called for Joe Biden, it is time to start asking what a Biden Presidency may mean, including in particular what SEC enforcement and regulatory activity might look like under a Biden Administration. As discussed below, the likelihood is that we will see a more active SEC enforcement division and a shift back toward a more active regulatory approach.
Continue Reading What Does the Biden Victory Mean for the SEC?