The SEC Will Require Admissions Of Wrongdoing To Build Back Trust In America’s Institutions

Pietragallo Gordon Alfano Bosick & Raspanti, LLP
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Pietragallo Gordon Alfano Bosick & Raspanti, LLP

Takeaways:

The SEC’s Director of Enforcement plans to build back trust in America’s institutions “without fear or favor” by:

  • Tackling misconduct by “Crafting Appropriate Remedies”
  • Cracking down on egregious conduct by instituting officer and director bars in cases of scienter-based violations

Gurbir Grewal, the former Attorney General of New Jersey and current Director of Enforcement for the Securities and Exchange Commission, has big plans to build back trust in the SEC. In public comments at SEC Speaks 2021 in Washington D.C., Director Grewal did not shy away from calling out the repeated lapses by big business and the double standard used by regulators. While acknowledging that this decline in public trust is not attributed to a single cause, Director Grewal revealed the agency’s plan to build back trust in America’s institutions “without fear or favor.”

Among other enforcement actions, Director Grewal signaled that the agency will tackle misconduct by ‘Crafting Appropriate Remedies.’ This includes requiring admissions of wrongdoing in “cases where heightened accountability and acceptance of responsibility are in the public interest.” Director Grewal and the SEC believe these admissions of wrongdoing will make strides in restoring public trust in American institutions. Director Grewal spoke directly to lawyers, counselors, and gatekeepers with influence over market behavior to join him in modeling excellence in compliance efforts. To the SEC, this means, “firms need to think rigorously about how their specific business models and products interact with both emerging risks and enforcement priorities, and tailor their compliance practices and policies accordingly.”

These efforts to build back trust do not require admissions of wrongdoing in every case. Director Grewal acknowledged that this requirement is prophylactic, aimed at curbing misconduct that harms the public the most. In pursuit of building trust, the SEC will crack down on egregious conduct by instituting officer and director bars in cases of scienter-based violations. Finally, Director Grewal noted that conduct-based injunctions, such as prohibiting a defendant from engaging in such activities as stock trading and securities offerings are important remedies.

To read Director Grewal’s full statement at SEC Speaks 2021, follow the link: https://www.sec.gov/news/speech/grewal-sec-speaks-101321

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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