Compliance innovation moves fast, but the news moves faster. To keep you and your team up to speed on the latest happenings and goings-on in the compliance world, we’ve aggregated the top five articles from the past few weeks to provide you with an in-depth look at the regulatory ecosystem.
Stay up-to-date and in the know on everything happening in the word of compliance and regulation as of October 27, 2023.
‘All Cases Are Important,’ SEC’s Gensler Says – Author Melanie Waddell
Gary Gensler, the Chairman of the Securities and Exchange Commission (SEC), emphasized the importance of addressing all cases promptly to maintain market integrity during his speech at the Securities Enforcement Forum. He stressed that “all cases are important” and that the SEC acts swiftly to seek penalties and preventive measures to deter wrongdoers. Gensler encouraged securities attorneys to promote proactive compliance within their clients. In fiscal year 2023, the SEC filed over 780 actions, securing judgments and orders totaling $5 billion, with $930 million distributed to harmed investors. He also highlighted the significance of recordkeeping in preserving market integrity. Gensler mentioned recent actions against firms for off-channel communications, emphasizing the need for proper policy implementation. Gurbir Grewal, the Director of the SEC’s Division of Enforcement, echoed this sentiment.
SEC steps up enforcement: Actions increase, money obtained falls in fiscal 2023 – Author Mark Schoeff Jr.
In the past fiscal year, the SEC increased its enforcement actions, with over 780 cases filed, including 500 stand-alone cases, up 20 from the previous year. These actions led to judgments and orders totaling $5 billion and $930 million returned to harmed investors, though the total collected from offenders dropped from $6.4 billion in the prior fiscal year. Gary Gensler, the SEC Chair, highlighted the importance of deterrence through penalties, as well as individual and firm accountability. He also mentioned high-profile cases involving off-channel communications, where the SEC has taken action against 40 firms and ordered $1.5 billion in penalties since December 2021. Gensler defended the SEC against accusations of “regulation by enforcement,” stating it’s enforcing existing laws and regulations.
The SEC’s early regulatory warning shot and 6 other takeaways from its 2024 exam priorities – Author Dan Shaw
The SEC’s examination priorities for 2024 are focused on cryptocurrency, cybersecurity, marketing, and hybrid advisory-brokerage firms. The SEC has increased the frequency of its exams and regularly informs firm executives about areas of scrutiny. Notably, the new marketing rule allows advisors to use client testimonials and celebrity endorsements. Data security and disclosure of conflicts of interest remain top priorities. ESG (Environmental, Social, Governance) is conspicuously absent, but experts believe it’s because the SEC is actively pursuing cases related to alleged “greenwashing.” Despite the absence, ESG remains significant, and regulatory attention on it is expected to grow in the future.
Ethereum ETFs Are Here. Is Spot Bitcoin Next? – Author Ric Edelman
The SEC’s recent approval of nine Ethereum futures-based exchange-traded funds (ETFs) has raised questions about when they will allow spot Bitcoin ETFs. Investors eagerly await the SEC’s decision on this matter, especially after a court ordered the SEC to reconsider Grayscale’s Bitcoin Trust ETF application. While the Ethereum futures ETFs signify progress in mainstreaming crypto, approval for the ten pending spot Bitcoin ETF applications remains uncertain. Many, except SEC Chair Gary Gensler, believe a spot Bitcoin ETF would benefit investors by offering low costs, transparency, and ease of management. Some members of Congress have urged the SEC to approve these ETFs promptly, causing frustration among those seeking investment opportunities in the crypto space.
SEC to investment funds: Quit playing name games – Author Paul Andrews
The SEC has updated rules governing investment fund names to ensure they accurately reflect the fund’s holdings, addressing issues of style “drift” or misalignment that often mislead investors. This update closes existing loopholes and aligns thematic or investment style funds, including ESG products, more closely with their actual holdings. It is a response to the rise of greenwashing, where funds mislead investors with claims of environmental or sustainable investments. The move aims to enhance disclosure, reporting, and review requirements for such funds. The update emphasizes the importance of investors and advisors looking beyond fund names and examining the details of investment products, including fees and performance. The rule allows fund managers some flexibility to address deviations from the defined parameters. Regulators are urged to consider the evolving nature of investment terms and avoid overly prescriptive definitions. This rule seeks to promote transparency and accuracy in fund naming conventions and acknowledges the role of fund managers’ discretion in volatile markets.
Have question about recent trends and happenings in the financial regulatory compliance space? Schedule time to speak with an expert today!