Key Takeaways
- Strengthen compliance: Foreign issuers looking to tap U.S. capital markets, as well as companies with foreign operations, should reexamine and fortify internal controls, disclosure processes, and risk-management programs in response to heightened regulatory scrutiny.
- Protect "gatekeepers" from exposure: Auditors, underwriters, and other capital markets intermediaries representing foreign companies face elevated enforcement risk and should calibrate diligence, engagement, and review protocols to current SEC expectations.
- Anticipate further regulatory measures: Foreign issuers and "gatekeepers" should stay apprised, as new disclosure guidance and rule changes may be forthcoming as the SEC expands its efforts to address cross-border fraud.
The Securities and Exchange Commission ("SEC") announced on September 5, 2025, the formation of a "Cross-Border Task Force" within its pision of Enforcement to identify and combat cross-border fraud harming United States investors.1 The new Cross-Border Task Force plans to leverage "every available tool to combat transnational fraud," including all of the pision of Enforcement's resources and expertise,2 and aligns with Chairman Atkins' pursuit of fraud and manipulation in the securities markets.3 The Task Force also is the first to be overseen by the Enforcement pision's new director, Judge Margaret Ryan.4
A primary focus of the Cross-Border Task Force will be to investigate potential violations of the U.S. federal securities law by foreign-based companies, with a specific focus on China and other high-risk regions.5 According to the SEC, the Cross-Border Task Force will prioritize and target market manipulation efforts, such as "pump-and-dump" and "ramp-and-dump" schemes, where actors artificially inflate the price of a stock before dumping their shares into the market to profit.6 Notably, the SEC has explicitly stated that it will also focus its enforcement efforts on "gatekeepers," such as underwriters and auditors that help foreign issuers access U.S. capital markets.7 The so-called "gatekeepers" can expect to be the target of the SEC's heightened scrutiny.
In furtherance of the SEC's priority to prosecute fraud committed by foreign issuers, Chairman Paul Atkins indicated that he also directed staff across the SEC—including the pisions of Corporation Finance, Examinations, Economic and Risk Analysis, Trading and Markets, and International Affairs—to "consider and recommend measures to better protect U.S. investors, including new disclosure guidance and any necessary rule changes."8 Accordingly, investors and corporate compliance teams should closely monitor forthcoming regulations and guidance.
Emphasis on China
The Task Force appears to be in response to a larger emphasis on China concerns. Shortly after being sworn in as SEC Chairman, Chairman Paul Atkins received a letter from Members of Congress urging the SEC to use its authority "to protect U.S. markets, investors, and national security" in response to the Members' "grave concern[s] over the continued presence of Chinese companies on U.S. stock exchanges."9 The letter noted that "[t]hese entities benefit from American investor capital while advancing the strategic objective of the Chinese Communist Party" and "pose an unacceptable risk to American investors."10
Following receipt of this letter, Chairman Atkins received a letter from certain state financial officers further urging the SEC "to investigate delisting China-based issuers from U.S. exchanges to protect American investors" from Chinese government actions that "create an environment of opaqueness that is antithetical to [SEC] reporting requirements and fraud prohibitions."11
Just this month, the NASDAQ proposed certain enhancement to it listing standards, including a $25 million minimum in public offering proceeds for companies principally operating in China.12
Footnotes
1. U.S. Securities and Exchange Commission, SEC Announces Formation of Cross-Border Task Force to Combat Fraud (September 5, 2025), available here.
2. Ibid.
3. Ibid.
4. U.S. Securities and Exchange Commission, SEC Names Judge Margaret Ryan as Director of the pision of Enforcement (August 21, 2025), available here.
5. Ibid.
6. U.S. Securities and Exchange Commission, Pump and Dump Schemes, Investor.gov, available here; Hugh Kennedy, Cross-border fraud task force formed, Regulatory Compliance Watch (September 11, 2025), available here.
7. See n.1, SEC Announces Formation of Cross-Border Task Force to Combat Fraud (September 5, 2025).
8. Ibid.; see also Beste, Hulsey, et al., SEC Announces Formation of Cross-Border Task Force to Combat Fraud (September 8, 2025), available here.
9. United States House of Representatives, Letter to Chairman Atkins (May 2, 2025), available here.
10. Ibid.
11. Adam Crum, Kimberly Yee, et. al., Letter to Chairman Atkins (May 20, 2025), available here.
12. NASDAQ, NASDAQ Proposes Changes To Its Listing Standards (September 3, 2025), available here.
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