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As I noted last week, President-Elect Donald Trump has indicated his intent to name former SEC Commissioner Paul Atkins as SEC Chair in the upcoming new administration. Atkins’s appointment, as I noted in last week’s post, could mean significant changes to the agency’s regulatory approach and enforcement priorities. Observers and commentators have continued to weigh in on the potential implications of Atkins’s appointment, and, as discussed below, academic commentators have tried to emphasize the importance of monitoring the agency closely under the new administration to ensure that it continues to be able to fulfill its traditional mission.Continue Reading More About the SEC Under the Incoming Presidential Administration

On December 11, 2024, the Fifth Circuit, sitting en banc, and by a vote of 9-8, struck down Nasdaq’s board diversity rules. The full Court’s decision overrules an earlier ruling of a three-judge panel that had upheld the Nasdaq rules.  The en banc panel held that the SEC exceeded its authority when it approved the rules. The court’s ruling, which can be found here, represents the latest blow against corporate DEI initiatives.Continue Reading Fifth Circuit Strikes Down Nasdaq Board Diversity Rules

As D&O insurance professionals try to assess the potential impact on the industry from Donald Trump’s return to the White House next month, one area of focus has been on the Trump’s appointment powers. This includes, obviously, the President’s authority to appoint judges to the federal judiciary, but in addition involves his power to make appointments to the Presidential cabinet and to the federal agencies. As Trump’s appointments have unfolded over the last few weeks, none looms larger (for now at least) for the D&O arena than the announcement last Wednesday that Trump will nominate former SEC Commissioner Paul Atkins as SEC Chair. This appointment, if confirmed, could result in a significant change of direction at the SEC, which in turn could have important implications for the world of D&O.Continue Reading Trump Selects “Anti-Gensler” for SEC Chair

In recent days, SEC observers have speculated about who the new head of the agency will be in the incoming Trump Administration and what the new leadership might mean for the agency’s regulatory and enforcement agenda. While we await the upcoming changes, it is still worth asking what the agency has been up to from an enforcement standpoint in the most recently completed fiscal year (ended September 30, 2024). The agency’s recently issued enforcement activity report and a separate academic study of the agency’s enforcement activity against public companies and their subsidiaries both reveal some interesting and arguably unexpected information about what the agency has been doing. Among other things, the agency’s report shows that while the agency’s overall enforcement activity levels declined in the most recent fiscal year, the agency’s total recoveries were at record levels – but both of these observations require further discussion as well.Continue Reading SEC’s FY 2024 Enforcement Activity Declined While Total Financial Remedies Surged

When it became public a few weeks ago that the SEC had disbanded its Climate and ESG Task Force, the SEC emphasized that it was not taking its eye off of ESG-related issues. In the latest example of the SEC’s continuing ESG-related monitoring, late last week the ESG announced that it had settled charges against investment adviser Invesco Advisers. The agency alleged that the company had made misleading statements about the percentage of company-wide assets under management that integrated ESG factors in investment decisions. In settling the charges, the company agreed to pay a $17.5 million civil penalty. The SEC’s November 8, 2024, press release about the charges and the settlement can be found here. The SEC’s November 8, 2024, cease-and-desist order in the matter can be found here.Continue Reading SEC Charges Investment Adviser With ESG-Related Misleading Statements

With the news broke within the last few weeks that months earlier the SEC had quietly disbanded its Climate and ESG task force, the agency took pains to emphasize that the winding up of the Task Force did not mean that the agency was no longer policing ESG-related issues. At least one recent development underscores the fact that the agency is continuing to monitor ESG concerns, particularly “greenwashing”-type concerns. Earlier this week, the agency initiated entered an agreed cease-and-desist order against investment adviser WisdomTree Asset Management, based on alleged misstatements and compliance failures relating to the firm’s execution of its ESG investment strategy. Among other things, the agency alleged that the firm’s funds invested in the investment classes it had said it would avoid.Continue Reading SEC Charges Investment Adviser With Failing to Adhere to Stated ESG Investment Criteria

Over the last several months, various SEC spokespeople, including SEC Chair Gary Gensler, have issued strong precautionary statements against so-called “AI-washing,” which Microsoft Co-Pilot, an AI-powered tool, defines as a “deceptive marketing tactic where a product or service is promoted by exaggerating or falsely claiming the use of artificial intelligence.” The SEC has even issued an advisory warning investors against exaggerated or fraudulent AI-related claims.  In several prior enforcement actions, the SEC has made it clear that it is prepared to pursue those whom it deems to have engaged in AI-washing.

In the latest example of the SEC’s AI-washing focused enforcement activity, late last week the SEC announced that it had entered settled charges against an investment advisor, its principals, and related entities, alleging that the parties engaged in misrepresentations concerning the firms’ alleged used of AI to perform automated trading in clients’ accounts. The SEC’s October 10, 2024, press release regarding the action against Rimar Capital USA and related entities and individuals can be found here. The SEC’s October 10, 2024, administrative order in the matter can be found here.Continue Reading Investment Advisory Firm Hit with AI-Washing SEC Enforcement Action

In March 2021, to great fanfare, the SEC announced its formation of a Climate and ESG Task Force to “develop initiatives to proactively identify ESG-related misconduct,” as well as to “coordinate the effective use of Division resources, including through the use of sophisticated data analysis to mine and assess information across registrants, to identify potential violations.” Now, it turns out that, much more quietly, the agency has disbanded the Task Force. As first reported in a September 12, 2024, Bloomberg article (here), the SEC shut down the Task Force “within the past few months.”Continue Reading SEC Disbands Climate and ESG Task Force

As I noted in a blog post at the time, in June the U.S. Supreme Court entered its opinion in the SEC v. Jerkesy case, striking down the SEC’s use of Administrative Law Judges in civil penalty action. In the following guest post, Gregory Markel, Sarah A. Fedner, and Gershon Akerman of the Seyfarth Shaw law firm take a detailed look at the case and consider its significance and implications. A version of this article previously was published in the Practical Law Forum. I would like to thank the authors for allowing me to publish their article on this site. I welcome guest post submissions from responsible authors on topics of interest to this site’s readers. Please contact me directly if you would like to submit a guest post. Here is the authors’ article.Continue Reading Guest Post: SEC Administrative Proceedings After SEC v. Jarkesy

It has been a while since I have had occasion to write about third-partly litigation financing. However, recent developments at the SEC, in which the agency has pursued enforcement actions alleging that various purported vehicles to finance litigation had defrauded prospective investors, have brought litigation funding back onto my radar screen. Once again, as in the past, various groups are sounding alarm bells about third-party litigation funding, as discussed below.Continue Reading Litigation Funding in the Spotlight