Year in Review: SEC Round Up for 2013

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 Year in Review: SEC Round Up for 2013I love taking stock of the highlights of a year as it draws to a close, so I am doing a mini-series of posts on topic.  The first one examines the SEC.  To call 2013 a big year for them is an understatement.

Leadership Transition

The SEC changes leadership. In April, former prosecutor Mary Jo White comes in as the SEC’s new chair. Upon her confirmation, she promises to implement a “bold and unrelenting” enforcement program at the SEC.  Overpromising and underdelivering not being her style, she delivers.  That and much more.

Agency Rulemakings

In 2013, the SEC struggles to keep up with its busy rulemaking agenda. It releases several key rules, though, under both the JOBS Act and Dodd-Frank, the presentation is in historical order:

  • Crowd funding:  The SEC finally proposes rules under Title III of the JOBS Act in October that allow start-ups and small businesses to raise capital by offering and selling securities over the Internet. The comment period ends February 3, 2014.
  • General solicitation:  A month before, the SEC finalizes rules under Title II of the JOBS Act to lift the ban on general solicitation in private securities offerings. Firms are now free to promote securities offerings to accredited investors.  The agency is still considering additional requirements that would impose advance notice filings, submission of offering materials to the SEC and mandatory additional disclosures.
  • Identity theft:  In April, the SEC adopts the new identity theft requirements jointly with the CFTC. The rules, which are mandated by Dodd-Frank, require firms to adopt programs to detect, prevent and remediate identity theft.
  • Registration rules for municipal advisers: In September, the SEC adopts new rules for municipal advisors.  The new rules are aimed to establish a permanent registration regime for municipal advisors as required by the Dodd-Frank Act.

Enforcement Priorities

Enter Mary Jo White.

  • “Neither admit nor deny” becomes history. The SEC changes it policy of “neither-admit-nor-deny” in settlements.  Gone are the days of ambiguity.  Settlements from now on require admission of wrongdoing. Nothing cavalier about that any more either.
  • Whistleblower awards:  The SEC issues its largest award under the new whistleblower program, $14 million.  The program rewards whistleblowers providing high quality original information that results in enforcement.
  • Insider trading prosecutions: The SEC continues to make insider trading a top priority.  Its most high-profile case is against SAC Capital, resulting in a $616 million penalty, and Stephen A. Cohen.  Overall, the agency brings nearly 20 other enforcement actions for insider trading in 2013.

Exam Priorities

SEC examiners continue to scrutinize performance issues, including valuation, performance reporting and aberrational returns, as well as conflicts of interests, and dual registrants.

As always, if you have questions or comments, please call, e-mail or tweet me @Bettina Eckerle.