SEC Guidance

Subscribe to SEC Guidance

On May 25, 2022, the U.S. Securities and Exchange Commission (“SEC”) proposed amendments to rules and related reporting forms under the Investment Advisers Act of 1940 (the “Advisers Act”) and the Investment Company Act of 1940 (the “Investment Company Act”) that are ostensibly intended to provide additional transparency regarding the use of environmental, social, and governance (“ESG”) factors by investment advisers and investment companies (the “Proposal,” available here), but which will also give SEC Examination and Enforcement staff additional tools to track and target advisers and funds pursuing an ESG strategy.
Continue Reading New ESG Rule Proposal Raises the Stakes under SEC’s New Marketing Rule

On May 23, 2022, the Securities and Exchange Commission (“SEC”) announced the inaugural enforcement action against an investment adviser by its much hyped ESG Task Force.[1]  As expected, this case does not find fault with the concept of ESG or conduct suggesting actual wrongdoing.  Instead, consistent with bread and butter policy for the SEC’s Enforcement Division, the SEC charged BNY Mellon Investment Advisers (“BNYMIA”) for failing to act consistently with its ESG disclosures to investors and having inadequate policies and procedures to prevent the misleading disclosures.  While the penalty of $1.5 million could be seen as small for this SEC, BNYMIA was charged with negligent fraud under Section 206(2), Section 206(4) and Rule 206(4)-8 under the Advisers Act, in addition to compliance violations.
Continue Reading SEC’s ESG Task Force Comes Out Swinging with Inaugural Enforcement Action Ahead of New ESG Disclosure Rules

On March 30, 2022, the U.S. Securities and Exchange Commission (“SEC”) Division of Examinations (the “Division”)—formerly the Office of Compliance Inspections and Examinations—released its 2022 Examination Priorities (“2022 Priorities”).  The Division is undergoing extensive leadership changes, with the recent departures of several top officials.  Consistent with the aggressive agenda set by Chair Gensler for the SEC generally, the Division has returned to its pre-pandemic caseload, conducting over 3,000 exams in fiscal year 2021, issuing over 2,000 deficiency letters, and making 190 referrals to the Enforcement Division.  Despite the management changes, the 2022 Priorities generally retain perennial risk areas as the core focus, but include several new and emerging risk areas reflecting the policy goals espoused by Gensler in recent proposed rule releases and public statements.
Continue Reading SEC Division of Examinations Reinforces Gensler Initiatives in its 2022 Exam Priorities

The SEC and a consortium of 32 states recently announced a $100 million settlement with BlockFi Lending LLC over its crypto lending product, BlockFi Interest Accounts. The SEC alleged BlockFi had violated the securities laws by failing to register its interest-bearing crypto lending product as a security, failing to register itself as an investment company,…

On January 24, 2022, Securities and Exchange Commission Chair Gary Gensler gave a speech at the Northwestern Pritzker School of Law’s Annual Securities Regulation Institute signaling the SEC’s intention to step up its cyber-related regulatory and enforcement efforts.  Gensler described the continued rise in cybersecurity incidents targeting the financial sector as a serious threat to the nation’s economy and critical infrastructure, with costs potentially in the trillions of dollars.
Continue Reading SEC Chair Previews Ramp Up in Regulation and Enforcement in the Cybersecurity Context

On January 26, 2022 the U.S. Securities and Exchange Commission (“SEC”) adopted proposed amendments to Form PF that would dramatically expand both the frequency and amount of reporting by private fund advisers and hedge fund advisers (the “Proposal”).  The Proposal is purportedly intended as part of an effort to bolster the Financial Stability Oversight Counsel’s…

2021 was a year of transition for white-collar criminal and regulatory enforcement. As courthouses reopened and trials resumed, newly-installed heads of law enforcement authorities looked to reset priorities and ramp up enforcement in the first year of the Biden administration. …
Continue Reading Priorities, Trends and Developments in Enforcement and Compliance

On August 9, 2021, the SEC issued a cease-and-desist order against digital asset exchange Poloniex, Inc. for allegedly operating an unregistered exchange in violation of Section 5 of the Exchange Act in connection with its operation of a trading platform that facilitated the buying and selling of digital asset securities.[1]

In the cease-and-desist order, the SEC alleged that Poloniex met the definition of an “exchange” because it “provided the non-discretionary means for trade orders to interact and execute through the combined use of the Poloniex website, an order book, and the Poloniex trading engine.”  The SEC also found, based on internal communications, that Poloniex decided to be “aggressive,” ultimately listing token(s) it had internally determined carried a “medium” risk of being considered securities under the Securities Act of 1933 pursuant to the test set forth by the U.S. Supreme Court in SEC v. W.J. Howey.[2]  However, the SEC did not identify what digital asset(s) it determined were securities nor why, simply stating that Poloniex facilitated trading of “digital assets that were investment contracts and therefore securities.”

Without admitting or denying the SEC’s findings, Poloniex agreed to the entry of the order and a payment of $10,388,309 in disgorgement, prejudgment interest, and a civil penalty.
Continue Reading SEC Enforcement Action Against Poloniex Signals Heightened Scrutiny for Crypto Exchanges

Last week, John Coates, the Acting Director of the SEC’s Division of Corporation Finance (“Corp Fin”), released a statement discussing liability risks in de-SPAC transactions.

The statement focused in particular on the concern that companies may be providing overly optimistic projections in their de-SPAC disclosures, in part based on the assumption that such disclosures are protected by a statutory safe harbor for forward-looking statements (which is not available for traditional IPOs).  Director Coates’s statement questions whether that assumption is correct, arguing that de-SPAC transactions may be considered IPOs for the purposes of the statute (and thus fall outside the protection offered by the statutory safe harbor).  He therefore encourages SPACs to exercise caution in disclosing projections, including by not withholding unfavorable projections while disclosing more favorable projections.
Continue Reading Acting Director of SEC’s Corp Fin Issues Statement on Disclosure Risks Arising from De-SPAC Transactions

On March 5, 2021, the Securities and Exchange Commission (“SEC”) filed a lawsuit in federal court against AT&T, Inc. (“AT&T”) for violating Regulation FD, and also charged three of AT&T’s Investor Relations executives with aiding and abetting this violation.[1]  Reg FD (which stands for “Fair Disclosure”) prohibits companies from selectively disclosing material nonpublic information to certain categories of individuals, including analysts and investors, and is intended to promote full and fair disclosure of such information in order to ensure that all investors have equal access to potential market-moving information.[2]
…
Continue Reading SEC Brings Rare Litigated Enforcement Action for Violation of Regulation FD