Jay Clayton, the recently appointed chair of the U.S. Securities and Exchange Commission (SEC) under President Trump, has signaled new directions in the enforcement of securities laws. What are the implications for financial risk managers?

“There is shift away from ‘broken windows’—trying the smallest cases—and there is no longer a requirement for companies to admit wrongdoing,” said Amy Poster, Managing Principal at Alpha Pacific Strategies. She was the moderator and opening speaker in a four-part webinar panel titled “SEC 2018 Enforcement Trends” sponsored by the Global Association of Risk Professionals (GARP) on July 25, 2018.

The SEC appears to be changing its metrics as well. In May 2018, Commissioner Hester Peirce rejected the use of enforcement statistics as a measure of the SEC’s success. Poster noted that in the “first half of fiscal year 2018, the SEC reported 15 enforcement cases against companies versus 45 for the same period in 2017, down by 67 percent.”

“There’s an increased focus on retail investors and retirees,” also known as “protecting Main Street,” Poster said. The SEC will go after conflicts of interest and hidden fees—and there’s also more rigorous review of “robo-advisors and digital platforms.” She said the enforcement arm will go after mutual funds and ETFs that have illiquidity and poor performance.

Cyber security is viewed as very important regarding the stability of global financial markets,” Poster said. “They’re aware of very strong growth in cryptocurrencies and initial coin offerings (ICOs). In September 2017 the SEC announced five new target areas:

  1. market manipulation
  2. hacking, violations involving distributed ledger technology
  3. initial coin offerings; intrusions in retail brokerage accounts,
  4. misconduct within the dark web
  5. cyber-related threats to trading platforms and market infrastructure

“Lastly, there’s focus on anti-money laundering,” she said. She referred to a few recent decisions by the Office of Compliance, Inspections, and Examination (OCIE) in this area, starting with the case of Aegis Capital, which was fined $750 thousand for failing to report suspicious activity.

Poster is also a GARP Contributing Writer and former Senior Policy Advisor, US Department of Treasury-Office of Special Inspector General-TARP. In March 2018 GARP published her article on the new priorities; see “SEC and FINRA 2018 Exam Priorities: Continuity and Change.” ª


Click here to view a report of the second presentation, by Ken Joseph.

Click here to view a report of the third presentation, by Thomas Zaccaro.

Click here to view a report of the fourth presentation, by Steve Hilfer.

Click here to view the GARP Webcast- SEC 2018 Enforcement Trends and Risk Management: Beyond Broken Windows.

The “new landscape” graphic with this posting is from Dragon Age Inquisition.