SEC Enforcement in FY24: Key Themes and End-of-Year Actions Reviewed
The 2024 fiscal year has come to a close for the U.S. Securities and Exchange Commission (SEC), ending with a flurry of year-end activities. Throughout the year, we’ve seen an uptick in enforcement sweeps, significant shifts in administrative law doctrine, and a continued willingness by the SEC to introduce new theories, often through litigated actions. Let’s take a closer look at some key themes from FY24 and highlight a few notable actions from August and September:
– A settlement under the Exchange Act showcasing acceptance of BTC and ETH trading
– Enforcement action against a former FTX auditor
– Charges against a director for undisclosed conflicts of interest
– The first custody rule action aimed at a crypto-focused investment adviser
– Action against a prominent asset manager due to long-standing disclosure failures
– An enforcement action centered on an adviser obtaining Material Non-public Information (MNPI) through an ad hoc creditors committee
– Enforcement action against the operator of a crypto lending product
– Approval of a PCAOB rule amendment decreasing scienter thresholds for associated person liability
I. Key Themes in SEC Enforcement From FY24
A. Broadening Utilization of Sweeps
The SEC’s Division of Enforcement has utilized sweeps more frequently to investigate multiple market participants for similar conduct in a single file. In the past year, sweeps have been used across various enforcement areas, addressing issues such as the Adviser’s Act Marketing Rule, Form 13F filing requirements, whistleblower protections, and more. The increased use of sweeps makes it harder to predict enforcement trends, but also allows the SEC to efficiently investigate and send a message through multiple actions simultaneously.
B. Continued Use of Novel Legal Theories
The SEC has continued to introduce novel legal theories in various enforcement areas, with mixed results. One notable theory is the “shadow” insider trading theory, successfully applied in SEC v. Panuwat, which extends liability to an insider’s trading in securities of a similar company based on a “market connection.” However, some novel theories, like the one in SolarWinds, have faced challenges, showcasing the evolving legal landscape within securities enforcement.
C. The End of Chevron and the Looming Impact of Loper Bright and Corner Post
Recent Supreme Court decisions have overturned the Chevron deference framework, impacting how administrative agencies exercise their authority. These decisions may lead to more frequent challenges to final agency actions, including SEC rules, affecting the regulatory environment and potentially driving a more deregulatory approach in the future.
Overall, FY24 has been a dynamic year for the SEC, with a focus on enforcement sweeps, novel legal theories, and regulatory changes that will shape the landscape for years to come.
