The U.S. Securities and Exchange Commission (SEC) obtains remedies of more than $4 billion in FY 2020; an increase from the previous year, amid a global pandemic.
Head of SEC discusses the agency’s actions in 2020
Last week, the head of the SEC said that the agency obtained financial remedies of more than $4 billion; an amount above that of 2019. Chairman Jay Clayton said the agency brought over 700 actions in fiscal year 2020, of which, a “significant” percentage was brought after March 15, when the COVID-19 lockdowns began in the U.S. In a new virtual format, the “SEC Speaks 2020” conference provided insight on recent developments, rulemakings, guidance and initiatives.
The Office of Compliance Inspections and Examinations (OCIE) conducted examinations that covered 15% of all SEC-registered investment advisors. OCIE also continued its complementary and highly effective asset verification program. Within the same period of FY 2020, OCIE verified 4.8 million investor accounts totaling $3.4 trillion in assets. The OCIE conducted over 300 outreach events, issued a report on Cybersecurity and Resiliency Observations and published eight risk alerts.
Results of the 2020 OCIE examinations
The division’s activities during the pandemic have so far included 36 trading suspensions, six COVID-related fraud actions, and over 150 newly opened COVID-related investigations and inquiries. What’s more, the commission awarded a record 39 individual whistleblowers approximately $175 million — more than in any prior fiscal year.
The SEC also continued its use of data analytics to unearth improper conduct. Recognizing entities may seek to take advantage of the COVID-19 crisis to engage in fraud, the SEC has actively engaged in enforcement efforts in this area.
“While the pandemic significantly impacted how we do our work, it did not negatively impact the work itself,” Clayton said. “At the same time, we added to our workload.” Their planned oversight, examination, rulemaking, and enforcement work continued with vigor, rigor and transparency.
How to adapt policies and procedures post-pandemic
The SEC has not yet released information on the total number of actions filed in fiscal year 2020. This data is expected to be released in early November. However, based on the recent FY 2020 data the SEC will have another successful year, resulting in high-quality SEC enforcement actions — all during a global pandemic.
The OCIE staff observed that many firms require their personnel to use videoconferencing and other electronic means to communicate while working remotely. While these communication methods have allowed firms to continue their operations, these practices create issues regarding the protection of confidential client information.
We have a few recommendations for amending policies and procedures to reflect the challenges brought on by COVID-19 and the resulting changes in the workplace.
- Assess your firm’s practices, policies and procedures to confirm they address regulatory obligations for investment advisors and broker-dealers working from home
- Provide firm personnel with additional training related to encryption and using password-protected systems
- Increase the level of oversight and interaction of supervised persons that are working remotely and using new and varied forms of communication to do business
- Check and double-check your systems for vulnerabilities and to ensure the communications are being captured for retention, with a particular focus on mobile devices
- Use your archiving and supervision solution to set up automated keyword and key phrase identifiers to proactively flag unauthorized communications
It is critical for investment advisors and broker-dealers to implement policies and procedures tailored to the COVID-19 pandemic and potential future pandemics. Regulators expect firms to adapt their oversight plans to this new normal or risk the consequences of a lax supervisory program.
Featured Guide – Electronic Communications Compliance Checklist for Broker-Dealers
Author: Marianna Shafir Esq. Corporate Counsel, Regulatory Advisor at Smarsh
Marianna Shafir, Regulatory Advisor at Smarsh, is responsible for regulatory affairs worldwide. With her expertise in financial services industry, compliance and eDiscovery, Marianna counsels Smarsh clients on meeting regulatory obligations, leveraging technology and guidance on best practices related to electronic communications supervision. Prior to joining Smarsh, Marianna worked for BNY Mellon and Invesco where she was an instrumental member on compliance teams.Marianna has also served as an adjunct professor at New York Career Institute where she taught Law Office Management and Real Estate Law. She earned her Juris Doctorate from Nova Southeastern University. She is a frequent speaker at industry conferences and a contributor to various online publications.
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