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Compliance Concepts

SEC Enforcement: Priorities for 2017

November 16, 2017

[Photos:  SEC Enforcement Co-Directors Stephanie Avakian and Steve Peikin]


The SEC Enforcement Division highlighted its regulatory priorities for the coming year which, according to Co-Directors Stephanie Avakian and Steven Peikin, entail the following enforcement approach: “Vigorous enforcement of the federal securities laws is critical to combat wrongdoing, compensate harmed investors, and maintain confidence in the integrity and fairness of our markets.”


ENFORCEMENT DIVISION’S 5 CORE PRINCIPLES.    The allocation of the Division’s resources with be driven by these 5 principles:


Principle 1:  Focus on the Main Street Investor

Principle 2:  Focus on Individual Accountability. *

Principle 3:  Keep Pace with Technological Change.

Principle 4:  Impose Sanctions that Most Effectively Further Enforcement Goals.

Principle 5:  Constantly Assess


Note *   While the SEC pursues misconduct by both institutions and individuals, individual accountability is more effective way to deter wrongdoing. The vigorous pursuit of individual wrongdoers must be the key feature of any effective enforcement program.


ENFORCEMENT DIVISION’S INITIATIVES.    To more closely align its allocation of resources with 2 key priorities – protecting retail investors, and combating cyber-related threats - the Division has created a Cyber Unit and a Retail Strategy Task Force.


     THE CYBER UNIT:   The Cyber Unit, which combines Enforcement's substantial, existing cyber-related expertise and its proficiency in digital ledger technology, initially will focus its efforts on the following key areas:


  • Market manipulation schemes involving false information spread through electronic and social media;
  • Hacking to obtain material nonpublic information and trading on that information;
  • Violations involving distributed ledger technology and initial coin offerings (ICOs);
  • Misconduct perpetrated using the dark web;
  • Intrusions into retail brokerage accounts; and
  • Cyber-related threats to trading platforms and other critical market infrastructure.


     THE RETAIL STRATEGY TASK FORCE:   The Task Force will be dedicated to developing effective strategies and methods to identify potential harm to retail investors. It is focused, in particular, on harnessing the Commission’s ability to use technology and data analytics to identify large-scale wrongdoing. The Task Force also works closely with OCIE to identify areas of risk to retail investors, and with the Commission’s Office of Investor Education and Advocacy to educate retail investors about those risks.


The Task Force will focus on:

  • wrongdoing implicating the microcap market, as well as Ponzi schemes and offering frauds, where victims typically are retail investors.
  • misconduct occurring at the intersection of investment professionals and retail investors – for example:

►   steering clients to higher-cost mutual fund share classes;

►   abuses in wrap-fee accounts;

►   IA recommendations to buy and hold highly volatile products, suitability issues involving the sale of structured products to retail investors,; and,

►   abusive sales practices such as churning and excessive trading.