Published on Apr 21st, 2024 |

SEC Releases

Introduction

Recently, the SEC Chair, multiple Commissioners, and Directors gave their opinions about the state of the regulatory environment.

Some notable speakers included SEC Chair, Gary Gensler, Director of the Division of Enforcement, Gurbir Grewal, and Deputy Director of the Division of Enforcement, Sanjay Wadhwa.

At a time of near record enforcement actions and a long list of potential rule adoptions for 2024, there are some helpful takeaways from these statements.

Key Takeaways

Key Takeaways

  • Multiple factors are considered for penalty amount due to the Marketing Rule.
    • Firm AUM.
    • Previous regulatory actions or recommendations made to the Firm by regulators.
    • If materials were non-compliant, were they promptly remediated.
    • If a need for strong deterrence is required.
    • If procedures were in place to reasonably comply with changes required by the Marketing Rule.
    • Self-reporting and cooperation.
  • Nearly 60 Firms since 2021 have been penalized for Recordkeeping Violations, with a total of over $1.7 billion.
  • Multiple factors are considered for penalty amount due to Recordkeeping:
    • The size, revenue, and number of employees of the Firm.
    • How extensive the violations are and does the sample size examined indicate pervasive failure.
    • The attempts made by the Firm to be compliant.
    • How similar violations were penalized in previous enforcements.
    • If problems were identified in previous examinations and not addressed.
    • Self-reporting and cooperation.
  • Members of the SEC leadership see their actions as ensuring and creating trust in Capital Markets.
  • New Rules and Amendments are seen as congruent with the history of the SEC adjusting to changes in the industry due to technology.
  • The impact of self-reporting and full cooperation by the Firms on the penalty amounts was highlighted frequently and expressly stated as the largest factor in reduction of penalty amount.

Vigilant's Conclusion

Vigilant’s Conclusion

It is helpful to hear statements and opinions made by the members of the SEC. Most importantly, when they provide direct advice on how to avoid significant regulatory penalties, one should take note.

There is little indication from their comments that a slowdown in regulatory action is on the horizon.

Firms should ensure that they have proper compliance programs in place to help identify and mitigate their risk proactively. A culture of proactive compliance will be an important key to success moving forward.

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