Regulatory Enforcement Defense

  • Representing a global bank senior executive in SEC investigation of supervision.
  • Representing the President and CEO, and separate Finance Executive, of a private company in SEC investigation regarding sales of private placement securities to international investors.
  • Representing a broker-dealer and registered representative in FINRA investigation of Outside Business Activities related to purchases of private placement securities.
  • Representing a broker-dealer in FINRA investigation concerning Large Options Position Reporting (LOPR).
  • Represented leading national securities exchange in investigation by the SEC Division of Enforcement related to exchange order type functionality, which concluded with a formal closing letter from the Division.
  • Representing an investment services company regarding the Municipalities Continuing Disclosure Cooperation Initiative (MCDC).
  • Serving as defense counsel for a Swiss bank in connection with the Department of Justice Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks.
  • Representing an individual criminally charged with insider trading.
  • Representing a broker-dealer owner in FINRA investigation into overseas trading and related supervisory issues.
  • Representing a senior trader of global bank in SEC enforcement action alleging parking of securities.
  • Representing a global bank’s senior capital markets executive in FINRA enforcement action alleging failure to establish adequate supervisory procedures.
  • Representing a broker-dealer in FINRA investigation into potential information barrier violations.
  • Representing a private equity firm’s principal in a settled SEC enforcement matter alleging conflicts of interest and non-disclosure.
  • Representing a financial institution as lead counsel in trial of an SEC administrative proceeding.
  • Representing a major broker-dealer in a FINRA investigation related to mutual fund sales practices and customer suitability.

Looking Forward

We see aggressive enforcement ahead. In recent remarks, new SEC Chair Gary Gensler invoked New Deal-era predecessors and promised “hard,” “novel,” and “high-impact” cases, while specifically rejecting criticism that this is “regulation by enforcement.” Despite decades of SEC no-admit settlements, he announced that his SEC “may seek admissions in certain cases where heightened accountability and acceptance of responsibility are in the public interest.” He reported instructing staff to move matters quickly and “cut back on meetings” with defense counsel, and cautioned SEC targets against “going right up to the edge of a rule or searching for some ambiguity in the text.”

More generally, Gensler has expressed strong interest in a variety of substantive areas, including payment for order flow, ESG disclosure, and crypto trading. These appear poised to become hot enforcement zones. Gensler has also credited the SEC staff whistleblower program, which has paid over $1 billion to tipsters over recent years, for its role in helping source cases. With Gensler’s new leadership team now settling in, we will likely see his new initiatives and approaches executed quickly.

The SEC’s FY 2021 numbers reflect steady production despite staff working from home and taking testimony by videoconference, with new enforcement cases rising to 434 from 405 the year before, delinquent filing matters fairly steady at 120 down from 130, and “follow-on” suspensions dipping to 143 from 180. However court rulings and legislative developments created uncertainty over SEC remedies, with disgorgement dropping to $2.4 billion from $3.6 billion in FY 2020, while penalties rose to $1.4 billion from $1.1 billion. Case mix tilted heavily toward securities offerings (33%), investment advisers and investment companies (28%), and issuer reporting and audit-accounting (12%), compared with single-digit showings by broker-dealer (8%), insider trading (6%), and market manipulation (6%).