On Sept. 5, the SEC announced the formation of a new Cross-Border Task Force to combat international market manipulation and fraud. The SEC said the task force will focus initially on investigating potential U.S. federal securities law violations by foreign-based companies, including potential market manipulation. Notably, the SEC said the task force will also investigate “gatekeepers, particularly auditors and underwriters, which help these companies access the U.S. capital markets.”
In announcing the new Cross-Border Task Force, SEC Chairman Paul Atkins welcomed foreign companies seeking access to the U.S. capital markets but warned that the SEC “will not tolerate bad actors — whether companies, intermediaries, gatekeepers or exploitative traders — that attempt to use international borders to frustrate and avoid U.S. investor protections.”
The SEC’s new focus on foreign entities comes amid the Trump administration’s America-first policy. It parallels the June 10 statement from Deputy Attorney General Todd Blanche announcing that the DOJ would be shifting prosecutorial resources toward Foreign Corrupt Practices Act cases that implicate U.S. national security and the competitiveness of U.S. companies. It also reflects calls from lawmakers and U.S. executives for increased enforcement to protect U.S. investors and level the playing field between U.S. and foreign companies, particularly Chinese companies.
Foreign companies that access the U.S. capital markets and their U.S. auditors and underwriters should expect increased scrutiny from the SEC. Now is the time for foreign companies and their U.S. auditors and underwriters to take steps to ensure company policies and practices around disclosures, financial statements and trading comply with the U.S. federal securities laws.
