SEC Division of Enforcement (the "Division") Co-Director Steven Peikin detailed efforts to address emerging risks related to developing technologies and market complexity. In remarks at a UJA Federation Conference in New York, Mr. Peikin detailed strategies and initiatives undertaken by the Division with regard to initial coin offerings ("ICOs"), cryptocurrencies and cybersecurity.
Noting a significant increase in the quantity of funds raised by ICOs, Mr. Peikin cautioned that these offerings are accompanied by outsized risks for retail investors. Mr. Peikin stated that ICOs have the potential to provide value by offering investors innovative ways to access capital markets. However, he said, ICOs may lack track records, adequate business models or sufficient security protocols, and some are simply outright frauds. He explained that the Division is focused on a "balanced" approach that allows legitimate offerings to function effectively while identifying and addressing fraudulent and high-risk behavior.
Mr. Peikin said that the Division seeks to promote compliance and deter bad actors by (i) providing clear guidance on regulatory considerations and risks associated with ICOs, (ii) forming the Cyber Unit and utilizing other resources to actively investigate cyber-related misconduct and (iii) taking early action to stop or prevent misconduct and protect investor funds.
Mr. Peikin emphasized the Division's focus on holding individuals accountable for misconduct. He acknowledged the costs and time commitments associated with this strategy, but argued that its value as a deterrent against bad behavior justifies the Division's focused efforts.
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