As expected, SEC Chair Gary Gensler is taking the regulatory agency in a different direction than the most recent chairman Jay Clayton. Recent actions are pointing to a more activist environment and a new era of rulemaking. For starters, Gensler recently announced his policy team, which will be led by Heather Slavkin Corzo, policy director.
In short, the policy team consists of:
- Corey Klemmer, corporation finance counsel, who will focus on “policies designed to ensure that investors are provided with material information in order to make informed investment decisions, both when a company initially offers its securities to the public and on an ongoing basis as it continues to give information to the marketplace,” according to the official SEC statement;
- Adam Large, trading and markets counsel, who once worked for FINRA and is now responsible for “day-to-day oversight of the major securities market participants with a focus on broker-dealers and security-based swaps. Previously, he held positions in the Division of Economic and Risk Analysis, the Division of Examinations, and as Counsel to Commissioner Caroline A. Crenshaw,” SEC officials say:
- Mika Morse, climate counsel, who “serves as the lead policy advisor on climate-risk finance issues. Immediately before joining the SEC, Ms. Morse served as senior counsel and deputy legislative director for U.S. Senator Brian Schatz. In this role, she was responsible for developing and implementing the Senator’s legislative priorities on the Banking Committee, Commerce Committee, and Appropriations Committee,” according to the SEC announcement;
- Sirimal Mukerjee, investment management counsel, “counsels Chair Gensler on matters related to investment companies and investment advisers. Previously, he served as a branch chief in the investment adviser regulation office in the Division of Investment Management’s Rulemaking Office, where he worked on the development of policy and rulemakings relating to investment advisers, private funds, and investment companies,” note agency officials;
- And Sai Rao, trading and markets counsel, has “oversight of the major securities market participants with a focus on market structure. Prior to assuming this role, Mr. Rao worked in the Office of Financial Intermediaries as a financial economist in the SEC’s Division of Economic and Risk Analysis. … implementing Title VII regulations on security-based swaps, implementing clearing agency reforms, reviewing new exchange-traded products, and coordinating international efforts,” according to the SEC.
In a prepared statement, Corzo says that she is looking ahead “to advance the SEC’s ambitious rulemaking agenda on behalf of the American public.”
SEC Pushes CRS Filing & Delivery Deadlines
Beyond policy teams, the SEC has been busy with enforcement actions.
In particular, the SEC has settled charges with 21 investment advisers and six broker-dealers over allegations that they did not file and deliver their client or customer relationship summaries — known as Form CRS — in time to their retail investors. By filing late, the SEC alleges that these firms deprived clients the benefits of the CRS information.
Sidestepping the legalese for a moment, Adam S. Aderton, co-chief of the SEC enforcement division’s asset management unit, explains in a prepared statement: “Form CRS is intended to provide retail investors with a brief summary about the services a firm offers, its fees, conflicts of interest, and other information that can help investors make more informed choices.”
The SEC also offers a short history lesson: Form CRS was adopted on June 5, 2019, and compliance began June 30, 2020. SEC-registered firms were also expected to deliver the information to “existing retail investor clients or customers by July 30, 2020,” officials note. “The SEC also required firms to prominently post their current Form CRS on their website, if they had one.”
But, for the 27 firms in question, the SEC order alleges “that none of the firms filed or delivered its Form CRS, or posted it to its website, until being twice reminded of the missed deadlines by their regulators — in the case of investment advisers, by the SEC’s Division of Examinations, and in the case of broker-dealers, by the Financial Industry Regulatory Authority [FINRA].”
The full list of the affected firms and the penalties paid can be found here: https://bit.ly/2V3aq8u
And a Windfall for the Whistleblowers
Well, the SEC taketh but it also giveth in the form of money for whistleblowers.
On July 21, the SEC announced that it had awarded nearly $3 million to a whistleblower, which followed an award of $1 million on July 15. The nearly $3 million went to someone “whose information and assistance led to a successful SEC enforcement action,” according to the announcement. It was the same set of anonymous circumstances for the $1 million whistleblower payment.
An interesting aspect of the program, though, is that the total amount paid is trending toward $1 billion.
“The SEC has awarded approximately $942 million to 186 individuals since issuing its first award in 2012,” according to the July 21 announcement. “Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the monetary sanctions exceed $1 million.”
More about the whistleblower program can be found at: www.sec.gov/whistleblower.