The United States Securities and Exchange Commission (SEC) recently released data on their enforcement efforts in 2021. Interestingly, the vast majority of cases involved actions against a single individual and often involved allegations of wrongdoing within the crypto and special purpose acquisition company (SPAC) markets.
According to the feds, there was an increase in cases of 7% compared to the previous year, translating to 434 new enforcement actions. The SEC also reports 2021 saw a number of first-of-their-kind actions including those involving:
- DeFi technology. Decentralized finance (DeFi) is a relatively new financial technology that uses ledgers similar to cryptocurrency. Users can transfer assets like Bitcoin using DeFi, essentially removing banks and other financial institutions from the process.
- Dark web. The SEC also pursued cases of individuals using the dark web for insider trading.
- Regulation crowdfunding. The feds built successful cases involving the use of crowdfunding platforms to exchange unregistered securities.
In its press release, the SEC also highlighted its ability to freeze assets in an effort to protect investors have funds involved in these cases.
How does the SEC choose which cases to investigate?
The feds say the increase in cases is the result of a successful whistleblower program, noting “record breaking” achievements in 2021 and stating that they expect these actions find even more success in the future. The SEC highlighted one action to showcase this success which led to a $114 million payout to the whistleblower.
What does this mean for brokers and investment advisors in 2022?
The SEC has called on those with insider information to step forward if they have concerns of security violations. This should serve as a reminder to conduct regular internal audits to make sure all practices conform with applicable rules and regulations.
It is important to act if you find yourself the subject of an investigation or allegations of wrongdoing. Careful guidance and negotiations can help to mitigate the risk of litigation.