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Financial Services Law Insights and Observations

SEC enforcement director says admissions increase accountability

Securities SEC Enforcement

Securities

On October 13, the SEC Director of the Division of Enforcement, Gurbir Grewal, indicated that the agency will require admissions in cases “where heightened accountability and acceptance of responsibility are in the public interest.” Speaking before the Practising Law Institute’s SEC Speaks conference, Grewal discussed the link between repeated lapses by large businesses, gatekeepers, and other market participants and the decline in investor confidence. Addressing perceptions that regulators are failing to appropriately hold these businesses, including financial institutions, accountable and that there are two sets of rules—one for powerful companies and one for everyone else—Grewal discussed the need to sharpen enforcement efforts to reestablish trust. This includes emphasizing corporate responsibility, providing timely and accurate disclosures, focusing on gatekeeper accountability, and crafting appropriate remedies, particularly prophylactic ones. “When it comes to accountability, few things rival the magnitude of wrongdoers admitting that they broke the law,” Grewal stated. “Admissions, given their attention-getting nature, also serve as a clarion call to other market participants to stamp out and self-report the misconduct to the extent it is occurring in their firm.” He also discussed the importance of officer and director bars, adding that “if there is egregious conduct and a chance the person could have the opportunity to serve at the highest levels of a public company, we may well seek an officer and director bar to keep that person from being in a position to harm investors again.”

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