by T. GormanPosted on Posted in SECActions

The year 2022 was good by any measure for SEC Enforcement. To be sure limitations imposed on the investigative process by the great COVID pandemic persisted. Investigative testimony was taken by remote, not sitting across a conference room table from the witness. While the process for taking testimony by remote continues to improve, there is no substitute for facing the witness and watching the reaction to various questions and exhibits.

The same limitation impacted depositions in litigation. Depositions, like investigative testimony, was taken largely by remote rather than live in a conference room. Accordingly, evidence development in 2022 was impeded by pandemic caused restrictions during investigations and litigations.

Despite the limitations, the Commission filed just under 500 new enforcement actions. That is the largest number of enforcement actions filed in a calendar year in recent years. While it is undisputed that the number of enforcement actions initiated is not a measure of a program’s success, it is significant since initiating a large number of cases gives at least some indication of presence of the agency in the market-place to monitor events.

Perhaps the best indicator of the success of the enforcement program is the increasing number of areas in which enforcement actions were brought in 2022. A quick review of the cases discussed in earlier segments of this article gives some indication of the extensive reach of the enforcement division in 2022. That segment of this article lists cases in seventeen different areas. The examples cover topics ranging from free riding, touting, financial fraud and Reg FD to privacy. And, there were cases in more areas than those listed earlier.

While the Commission’s enforcement program has long been viewed as one of the best in Government, in recent years it has continued to improve. To be sure, the whistleblower program has been a great asset to the Division.

There is more, however. Data analytics and the Division’s investigative techniques continue to improve. Many consider the Commission’s use of data analytics and related techniques to be the best in government. The agency does not disclose just how its techniques work. The example of two new insider trading cases developed through data analytics cited in a press release last year does give some indication. There, despite the fact that the cases appeared to be unrelated while both were uncovered through data analytics at least suggests that a detailed analysis of the risks gleaned from the data may have aided in uncovering the cases.

Whatever the Division’s secret, however, it is effective. Increasing numbers of enforcement actions in a wide variety of areas is not just an interesting talking point but important to effective enforcement. This is because it helps create the impression of “omnipresence” – being everywhere. That kind of presence can only serve to reassure investors who seek to rely on the integrity of the market-place as they put their money at risk by making an investment.

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by T. GormanPosted on Posted in SECActions

Last week the Commission did not file any new enforcement actions, contrary to what they have done for weeks. There is no doubt however as we have repeatedly noted in this space that the number of cases is not determinative of the program. That is clearly the case here in view of recent results discussed in this space. The agency did resolve two previously filed actions while extending the comment period for one pending set of rules and publishing a Risk Alert from the Division of Examinations.

Be careful; be safe this week.

SEC

Comment period: The Commission reopened the comment period for Proposed Rule Amendments to Modernize Beneficial Ownership Reporting. The staff of the Division of Economic and Risk Analysis released a memorandum that provides supplemental data and analysis regarding the proposed amendments. The new comment period extends until June 27, 2023, or until 30 days after the date of publication of the reopening release in the Federal Register, according to the April 22, 2023 release (here).

Risk Alert: The Division of Examinations published a new risk alert titled Safeguarding Customer Records and Information at Branch Offices, on April 26, 2023 (here).

SEC Enforcement – Filed and Settled Actions

Statistics: Last week the SEC filed no civil injunctive actions and n0 administrative proceeding, excluding 12j and tag-along proceedings as well as those presenting conflicts for the author (which are counted in the totals).

Financial fraud: SEC v. SAExploration Holdings, Inc., Civil Action No. 1:20-cv-08423 (S.D.N.Y.) is a previously filed action which named as defendants Jeffrey Hastings, the company and three others. The amended complaint alleged that Mr. Hastings, while CEO of the company, participated in a multi-year fraud which falsely inflated revenue. Specifically, the firm recorded about $100 million in revenue from a series of acquisition contracts with a supposedly unrelated Alaska based firm that could not pay and that was controlled by Mr. Hastings and a co-defendant. Defendant Hastings, with assistance from others, also misappropriated about $12 million from SAE and routed about half of it back to SAE to make it appear the Alaska company actually was making payments as required. Mr. Hastings resolve the action, consenting to the entry of a permanent injunction which the Court entered based on Exchange Act Sections 10(b), 13(a), 13(b)(2)(A), 13(b)(2)(B) and 13(b)(5) and SOX Section 304. He will also pay disgorgement of $1,116,987.26, plus prejudgment interest of $194,835.52 that will be satisfied by the Order of Restitution in the parallel criminal case. He was also ordered to reimburse SAE $1,206,626 pursuant to Section 304 of SOX. On December 17, 2020 the Court also entered judgment by consent as to SAE. See Lit. Rel. No. 25700 (April 25, 2023).

FinCEN

Review: The Financial Crimes Enforcement Network issued its Year in Review for FY 2022, according to a release dated April 25, 2023 (here).

Hong Kong

Meeting: The Securities and Futures Commission of Hong Kong and CSRC of China held a high-level enforcement meeting to discuss cooperation, according to an April 28, 2023 release (here). At the meeting the regulators noted the favorable results form their cross-boundary enforcement cooperation since 2016. They also brief each other on cooperation and exchanging enforcement priorities.

Singapore

Remarks: Ravi Menon, Managing Director, Monetary Authority of Singapore, delivered remarks on 26 April 2023 on the greening of the financial system (here).

Singapore

U.K

Report: The. Financial Conduct Authority announced that the Office of Professional Body Anti-Money Laundering Supervision or OPBAS has concluded that professional bodies are continuing to demonstrate good levels of compliance with AML requirements. Efficiency improvements in supervision are necessary according to the April 28, 2023 release (here).

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