“Quite frankly, I think some have underestimated Clayton,” said Ken Joseph, Managing Director, Disputes and Investigations practice, at Duff & Phelps. “There is a de-emphasis on some areas and re-prioritization of other areas—but he is still focused on wrongdoing.” Joseph was referring to Jay Clayton, the recently appointed chair of the U.S. Securities and Exchange Commission (SEC).

Ken Joseph was the second 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. He is also former Head of the Securities and Exchange Commission’s New York Regional Office Investment Management Examination Program and hence was invited to give an “insider’s view” of recent changes.

Joseph briefly touched on ten “key areas for the risk manager’s radar.” Of these, we note six:

  1. Impact of the Supreme Court’s Ruling in Lucia vs. SEC – this ruling concluded that the SEC judge who penalized an investment advisor was improperly appointed. Such judges are not simply government employees, but must be appointed by the president, the courts, or heads of departments.
  2. Impact of SEC vs. Herrera – in this ruling, providing downloads of interview memoranda may be interpreted as a waiver of the attorney-client privilege.
  3. Big Data Analytics in Enforcement and Examinations – big data analytics provides an increased capability to detect and deter financial wrongdoing. “These tools have revolutionized examination and enforcement,” Joseph said. One example is the analysis of trading data using the ARTEMIS system.
  4. Initial Coin Offerings and Cryptocurrencies – the number of ICOs “has exploded” in the last year, and is now in the billions of dollars, causing Chairman Clayton to “move it to the front of the agenda,” Joseph said. “Are these coins more properly classified as securities?”
  5. Cybersecurity Risk and Disclosure Guidance – Joseph did not see much that was new about the change in SEC policy on this type of risk.
  6. Individual and Gatekeeper Liability – “At a minimum, risk managers should be aware of all Risk Alerts being issued by the SEC,” Joseph said. By his estimation, 80 percent of cases this year alone involve potential individual liability.

Joseph wound up his section with a brief discussion of the pros and cons of cooperating with the SEC when the Department of Justice comes to investigate a firm. ª


Click here to view a report of the first presentation, by Amy Poster.

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.