On the eve of the U.S. presidential election last week, the SEC Enforcement Division released its annual report for fiscal year 2020 (the “Report”), providing an overview of the Division’s enforcement figures, developments, and areas of focus in what Director Stephanie Avakian described as “the most challenging year in recent memory.”[1] This past year has marked, together with the longest shutdown in government history the year prior, a challenging but reasonably productive time for the SEC’s enforcement program. Just as last year’s report highlighted the Division’s struggles during the fiscal shutdown, the final annual report of the Clayton-led SEC focuses on the significant disruption the COVID-19 pandemic has caused to the Division’s operations, investigations, and priorities, including the suspension of testimony for several months, establishment of a Coronavirus Steering Committee, and redirection of resources toward COVID-related fraud. This time around, however, the Division could not avoid a drop-off in the number of enforcement cases, which seems attributable at least in part to the pandemic and its profound impact on the SEC’s operations.
Continue Reading From Government Shutdown to COVID-19: SEC Enforcement Division Releases Final Chapter of Jay Clayton-led SEC
Disclosure
Despite Disagreements, SEC Commissioners Emphasize Need for Clear Disclosure by ESG Funds
On September 17, 2020, SEC Commissioner Hester Peirce gave a speech that focused on potential issues raised by investment advisers that—while purporting to follow environmental, social and governance (“ESG”)-labeled investment strategies—did not, in Commissioner Peirce’s words, “walk the ESG walk.”[1] Her comments are the latest reminder that, while the SEC has continued to struggle with whether to mandate specific ESG disclosures, there seems to be consensus behind the SEC’s focus on determining whether advisers’ disclosures concerning ESG are sufficiently accurate and understandable. Thus, asset managers would be well served to review and, where warranted, enhance their ESG-related disclosures and compliance policies in an area where the SEC’s Enforcement Division may well be looking to bring cases.
Continue Reading Despite Disagreements, SEC Commissioners Emphasize Need for Clear Disclosure by ESG Funds
SEC Chief Accountant Weighs in on Accounting Issues During the COVID-19 Outbreak
On April 3, 2020, the SEC’s Chief Accountant, Sagar Teotia, issued a Statement on the Importance of High-Quality Financial Reporting in Light of the Significant Impacts of COVID-19 (the “OCA Statement”). The OCA Statement emphasizes that while the SEC Office of the Chief Accountant (“OCA”) appreciates the challenging environment that companies and their auditors face in attempting to comply with their financial reporting obligations due to COVID-19[1], and will not second-guess their reasonable judgments, OCA expects financial reporting to continue to “provide investors with high-quality financial information.” The OCA Statement also reaffirms OCA’s views on the importance of gatekeepers by pointing out the critical need for auditor independence in this uncertain economic environment. In addition to this general theme, the OCA Statement contains several notable points that will have implications for companies in the current situation, both in preparing their financial statements, and in taking steps to mitigate litigation and enforcement risk.
Continue Reading SEC Chief Accountant Weighs in on Accounting Issues During the COVID-19 Outbreak