Securities and Exchange Commission Chairman Gary Gensler warned securities lawyers that the regulator will take a tough stance on issuers and market participants who try to skirt financial-market rules or impede SEC investigations, in a Thursday speech to the Securities Enforcement Forum.
Gensler hinted that issuers of cryptocurrencies, and entities that faciliate their trade, would be under particular scrutiny going forward as the SEC will focus on the “economic reality” of a particular financial instrument and the purpose it serves, rather than differences in technology that underlie those instruments.
“We will continue to pursue misconduct wherever we find it,” Gensler said to the virtual gathering of white-collar defense lawyers. “That will include hard cases, the novel cases, and, yes, the high-impact cases — whether in special purpose acquisition companies, cyber, crypto, or private funds, whether accounting fraud insider trading, or recordkeeping violations.”
The SEC chief also introduced a new policy that staff lawyers should prioritize bringing enforcement cases to a resolution quickly, which means “cutting down on meetings with entities that want to discuss arguments” in their cases, he said, adding that defense lawyers often make a “strategic decision to burn the clock” and make it more difficult for SEC lawyers to collect evidence in cases through stalling tactics.
“So if you request a meeting, please make it targeted,” Gensler said. “Don’t expect multiple, repetitive meetings on the same issues.”
The speech comes as Gensler is cementing his reputation as the most aggressive SEC chairman in recent memory, less than 7 months into his tenure. He has laid out an ambitious rulemaking agenda, hoping to institute new rules on corporate disclosure of climate risk and labor practices, market structure, stock buybacks and much more.
He has also put the crypto industry on notice, arguing repeatedly that his agency has already done enough to explain how existing securities laws apply to digital assets, while suggesting that the vast majority of digital tokens now circulating are unregistered securities, and that their issuers are violating federal securities laws.
Gensler cemented his reputation as a hard-nosed enforcer and effective rulemaker during his time running the Commodity Futures Trading Commission, where he swiftly implemented dozens of rules required by the Dodd-Frank financial reform law in the wake of the financial crisis. His reputation and ambitions are so feared on Wall Street that a recent Bloomberg article described his agenda as “the everything crackdown.”
“If anyone underestimates his ability to get things done, they do so at their own peril,” said Micah Green, a lobbyist at law firm Steptoe & Johnson told the news agency.
Now, Gensler is appealing to defense attorneys to join him in his mission of protecting the U.S. public from financial misdeeds.
“Though you represent your clients, you also have an important role in upholding the law, which protects investors and our markets,” Gensler said at Thursday’s conference. “You can often be the first lines of defense. That’s particularly true when a client is getting close to crossing the line. I ask you to think about the economic realities…and not to help paper over the cracks.”