This March the Securities Industry and Financial Markets Association’s (“SIFMA”) Compliance and Legal Society Annual Seminar was held in Phoenix, Arizona. The seminar hosted over 300 industry experts who discussed the latest regulatory and compliance issues. This post will highlight remarks made by Mary Jo White, Chair of the U.S. Securities and Exchange Commission (“SEC”).
According to White, the SEC is practicing all-encompassing enforcement of securities laws. White began her comments by stating that her “message today is that a robust combination of criminal and regulatory enforcement of the securities laws is not only appropriate, but also critical to deterring securities violators, punishing misconduct, and protecting investors.” Investigations by the SEC are conducted independently but in cooperation with law enforcement agencies such as the Federal Bureau of Investigation (“FBI”) or Department of Justice (“DOJ”). By working with these law enforcement agencies the SEC is able to add tools such as wiretaps and search warrants to securities fraud investigations.
In her speech, White focused on the three areas below to explain how all-encompassing enforcement works in practice:
Insider trading is a staple of SEC and criminal prosecutors. These cases generally begin as referrals, containing information that suggests suspicious activity, from the Financial Industry Regulatory Authority (“FINRA”) or the Options Regulatory Surveillance Authority (“ORSA”). The SEC also utilizes newer technologies to assist with trade analysis along with civil tools such as the ability to freeze assets to bring about insider trading charges.
Most microcap fraud cases benefit from extensive cooperation from law enforcement. When patterns of suspicious trading activity are discovered, they lead to further investigation. This information can be the genesis for a criminal investigation utilizing traditional law enforcement methods such as undercover agents.
The SEC’s expert accountants work alongside law enforcement to uncover financial reporting fraud. Recently the SEC worked with the Manhattan District Attorney’s office to bring a case against a prominent law firm for its accounting misstatements.
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