The Securities and Exchange Commission (SEC) has published a report on enforcement actions during fiscal year 2023. In total, the agency pursued 784 enforcement actions, including administrative proceedings, which compares to 760 enforcement actions during fiscal year 2022.
The SEC issued the following statement on the report:
“The stand-alone enforcement actions spanned the securities industry, from billion-dollar frauds to emerging investor threats involving crypto asset securities and cybersecurity, and charged violations by diverse market participants, from public companies and investment firms to gatekeepers and social media influencers. The SEC also brought numerous enforcement actions addressing conduct that undermines oversight of the securities industry, including actions to protect whistleblowers and actions to enforce recordkeeping requirements and other investor protection requirements applicable to industry participants, including broker-dealers and investment firms.”
SEC Chair Gary Gensler said the results demonstrated the Enforcement Division’s effectiveness.
Gurbir S. Grewal, Director of the Division of Enforcement, said his division “stood up for the investing public.”
“I am extremely proud of the Division’s efforts, including those that are not directly reflected in today’s results like the many important investigations that may not result in enforcement actions or the thousand-plus ongoing investigations teams conduct each fiscal year – all of which help protect investors, hold bad actors accountable, and promote public trust.”
The SEC highlighted actions against issuers that utilized Reg A+, an exemption enabling online capital formation or crowdfunding.
The SEC said that it charged ten microcap companies with offering and selling securities that allegedly did not comply with Regulation A. Specifically, Reg A offerings, which were qualified but then had changes made before the offering was made available to the public without the SEC being notified of the changes. These firms apparently agreed to pay a combined $390,000 in civil penalties to settle the cases.
The SEC also pointed to crypto offerings that were targets of the Enforcement Division. The allegations ranged from “fraud schemes, unregistered crypto-asset offerings, platforms, and intermediaries, and illegal celebrity touting.”
Fraud charges included actions against crypto firms Terraform Labs and its founder Do Kwon; Richard Heart and affiliated entities Hex, PulseChain, and PulseX; and the big one FTX and Sam Bankman-Fried.
The Division also pursued multiple crypto offerings, deemed to be unregistered securities offerings, including Genesis/Gemini, Celsius, Kraken, and Nexo. These actions included staking and lending.
The SEC also filed its first actions against issuers of non-fungible tokens (NFTs).
In regard to digital asset marketplaces or crypto exchanges, the SEC brought actions against Beaxy, Bittrex, Binance, and Coinbase.
Multiple “influencers” were penalized for touting crypto offerings, which were deemed to be securities offerings. These promotions were required to disclose any compensation received for promoting these offerings.
The SEC mentioned specifically NBA Hall of Famer Paul Pierce and media celebrity Kim Kardashian as well as Lindsay Lohan, Jake Paul, Michele Mason (Kendra Lust), Miles Parks McCollum (Lil Yachty), Shaffer Smith (Ne-Yo), Aliaune Thiam (Akon), DeAndre Cortez Way (Soulja Boy), and Austin Mahone for allegedly illegally touting crypto asset securities without disclosing they were paid for these actions.
Environmental, Social, and Governance (ESG)-related cases garnered scrutiny – perhaps for the first time. ESG is a growing area of enforcement and disclosure for the SEC as it seeks to compel firms to quantify their impact on areas such as climate change.
The SEC filed charges against a Deutsche Bank subsidiary for making “materially misleading statements about its controls concerning ESG products.” Other firms were targets falling under the ESG category.