SEC Enforcement in FY24: Key Themes and Year-End Actions Reviewed
he other hand, the advent of new challengers who may not have previously existed opens the door to an increased diversity of views on what constitutes fair regulation, potentially resulting in a more balanced and responsive body of securities regulation in the future.
II. Notable Actions from August and September
A. Exchange Act Settlement on BTC and ETH Trading
In August, the SEC entered into a settlement with an entity for violations of the Exchange Act related to trading in Bitcoin (BTC) and Ether (ETH). This action was significant as it demonstrated a level of tolerance by the SEC for trading activities involving these popular digital assets. The settlement serves as a reminder to market participants that compliance with securities laws is necessary, even in emerging and innovative markets.
B. Enforcement Action Against Former FTX Auditor
Another notable action in August involved an enforcement action against a former auditor at FTX, a prominent cryptocurrency exchange. The SEC alleged that the auditor engaged in improper professional conduct by failing to adhere to auditing standards while conducting an examination of FTX’s financial records. This enforcement action underscores the importance of accountability and adherence to professional standards in the cryptocurrency space.
C. Director Charged for Undisclosed Conflicts of Interest
In September, the SEC charged a director of a publicly traded company for failing to disclose conflicts of interest related to personal investments. This action highlights the SEC’s commitment to ensuring transparency and accountability among corporate directors, who play a crucial role in safeguarding the interests of shareholders.
D. First Custody Rule Action Against Crypto-Focused Adviser
Also in September, the SEC took action against a crypto-focused investment adviser for violations of the custody rule. The adviser allegedly failed to meet the custody requirements for handling client assets, raising concerns about investor protection in the rapidly evolving crypto space. This action serves as a cautionary tale for investment advisers operating in the digital asset space.
E. Action Against Prominent Asset Manager for Disclosure Failures
The SEC also brought an action in September against a prominent asset manager for longstanding disclosure failures. The manager allegedly failed to provide investors with accurate and complete information about the risks associated with certain investment products, underscoring the importance of transparency and disclosure in the asset management industry.
F. MNPI Obtained Through Creditors Committee
In another enforcement action in September, the SEC targeted an adviser for obtaining material nonpublic information (MNPI) through an ad hoc creditors committee. This action raises concerns about the potential misuse of confidential information in securities trading and the importance of maintaining confidentiality and integrity in financial markets.
G. Enforcement Action Against Crypto Lending Operator
Lastly, the SEC announced an enforcement action in September against the operator of a crypto lending product for violations of securities laws. The operator allegedly misled investors about the risks and returns associated with the lending product, emphasizing the need for accurate and transparent information in the cryptocurrency space.
H. PCAOB Rule Amendment for Associated Person Liability
In a final notable development, the SEC approved a PCAOB rule amendment in September that lowers scienter thresholds for associated person liability. This change may have significant implications for individuals associated with public accounting firms and underscores the importance of holding all parties accountable for their role in financial reporting and auditing.
In conclusion, the FY24 concluded with a flurry of enforcement actions by the SEC, highlighting key trends and themes in the regulatory landscape. Market participants should remain vigilant and proactive in their compliance efforts to navigate the evolving regulatory environment effectively. The SEC’s continued focus on novel theories and enforcement strategies underscores the importance of transparency, accountability, and integrity in the securities industry for the protection of investors and the preservation of market integrity.
