The Securities and Exchange Commission (SEC) recently announced the Enforcement Results from fiscal year 2022, and there are a few items to note for fund managers and other financial professionals.
2022 was Chair Gary Gensler’s first full year in his position; predictions that his assumption of the position would bring in an era of aggressive enforcement are proving true. 2022 was a strong year for the enforcement division, and its approach in 2023 is expected to continue.
Priorities for investigations include digital assets, cyber security, ESG, and insider trading. Many of these investigations fall under white-collar crime, for which the skilled defense lawyers at Griffin Durham Tanner & Clarkson LLC can assist.
Key takeaways from the SEC’s Enforcement Results report
There are a few things to note about the recently released report:
- The SEC continues to address ESG-related incidents, including insider trading, cybersecurity threats or oversight, misconduct in digital asset trading, and other regulatory priorities.
- The Enforcement Division intends to focus on charging individuals for securities violations, including those who have supervisory responsibility and “gatekeeping” authority in the securities industry.
- Any securities market participant, individual and corporate, should conduct a risk assessment and review their SEC compliance protocols to make necessary revisions to controls, policies, and in-house procedures to address possible gaps.
With the considerable resources the SEC has to bring, finding a Georgia white-collar crimes defense attorney to help you understand how you could be affected by the SEC’s increased focus can help you make the right choices for your business.
2022 SEC enforcement actions
The SEC conducted 760 total enforcement actions in FY 2022, a 9% increase over the prior year. In addition, the Commission also filed 462 new independent enforcement actions, which was also higher than in FY 2021.
FY 2022 was a record-setting year for SEC disgorgement and penalties actions; the SEC obtained orders and judgments totaling more than $6.4 billion in penalties—the highest amount to date.
Many SEC actions against private fund advisors address recurring issues of fees and expenses, conflicts of interest, and MNPI.
Gatekeepers, such as lawyers, accountants, and transfer agents, are also a focus of the SEC in FY 2022 and moving forward. Other cases in the SEC crosshairs involve SPACs, cryptocurrency, and ESG, some of the high-profile matters of the last 18 months.
| “As reflected in these results, the Enforcement Division is working with a sense of urgency to protect investors, hold wrongdoers accountable and deter future misconduct in our financial markets,” said Gurbir S. Grewal, Director of the Division of Enforcement. |
Who is at risk for an SEC investigation in 2023?
Private fund advisors may face the most significant risk for an SEC investigation since 2015. Between 2015 and 2022, former SEC Chair Clayton focused more on “main street” investors; with the change in leadership, the focus is now more on the private funds industry. In the past year, the Commission has been comfortable taking on more cases and assessing higher penalties.
Private fund investors, according to Chair Gensler, “touch so much of our economy,” as the investment funds support small business owners, entrepreneurs, and managers of late-stage companies alike. Chair Gensler indicates that his focus on enforcement will promote fairness across the private fund industry.
Robust enforcement of penalties to deter future violations of SEC regulations
Higher penalties assessed by the SEC Enforcement Program initiated in FY 2022 were specifically intended to deter future violations of other investment entities and impose accountability on major financial institutions.
One example is the SEC’s action against JP Morgan Securities LLC and an additional 15 broker-dealers for failing to preserve work-related communications sent and received on employees’ personal devices. The aggregate penalties totaled $1.235 billion, and each company fined agreed to create undertakings to correct past failures and prevent similar misconduct in the future.
A judgment of fraud was rendered in December 2022 against Denmark-headquartered Danske Bank A/S after an investigation conducted by the SEC in conjunction with the U.S. Department of Justice. Danske Bank pled guilty to one count of conspiracy to commit bank fraud and paid penalties and restitution totaling $2.06 billion to resolve the investigation.
A Georgia white-collar crime attorney can protect you in an SEC investigation
The SEC has tremendous resources to bring to an investigation, and these investigations are notoriously thorough. If you are concerned about your company’s exposure or compliance policies or believe you will be investigated, contact Griffin Durham Tanner & Clarkson LLC at (404) 891-9150 (Atlanta) or (912) 867-9140 (Savannah) to speak with an experienced Georgia white collar crimes defense attorney today.