Gensler says penalties should not be “seen as the cost of doing business”

Securities SEC Enforcement

On November 2, SEC Chair Gary Gensler delivered remarks before the Practising Law Institute’s 54th Annual Institute on Securities Regulation, warning companies they may face enforcement consequences should they engage in misconduct. Explaining that penalties should not be “seen as the cost of doing business,” Gensler cautioned that “fraud is fraud, regardless of the types of investors you have defrauded and the types of securities used in the fraud.” Reminding companies that they are in violation of federal securities laws should they fail to register a security as required or fail to register an investment company, he highlighted a $100 million action taken against a New Jersey-based financial services crypto lending platform accused of failing to register the offers and sales of its retail credit lending product as one example of a company making materially false and misleading statements about its securities. (Covered by InfoBytes here.) Gensler also warned companies that improperly trading securities on inside information is a violation of securities laws, “regardless of the ‘form’ or ‘name’ of the securities involved,” and touched upon topics related to accountability, high-impact cases, working with partners at the federal, state, and international level, and professionals who violate public trust. Gensler stressed, however, that knowing when to pursue an enforcement action is important, and said that “[i]f the facts and the law merit we do not make a case,” he is “comfortable with that.” He added that the SEC rewards good behavior and encouraged companies to promptly self-report errors and cooperate with investigations. “If you mess up—and people do mess up sometimes—come in and talk to us, cooperate with our investigation, and remediate your misconduct,” he said.