United States: SEC Enforcement Co-Director Emphasizes International Cooperation In Civil Enforcement

SEC Division of Enforcement Co-Director Steven Peikin discussed the importance of international cooperation for regulators in civil enforcement.

In remarks at the IOSCO/Program on International Financial Systems-Harvard Law School Global Certificate Program for Regulators of Securities Markets, Mr. Peikin highlighted three areas where international cooperation is crucial for the SEC's enforcement program: initial coin offerings ("ICOs"), Foreign Corrupt Practices Act ("FCPA") violations, and microcap and other securities fraud. He also urged the SEC to address the effects of the European Union's new General Data Protection Regulation ("GDPR").

Mr. Peikin stated that growth in the ICO market conceals the fact that ICOs are "high-risk investments." According to Mr. Peikin, the SEC generally deals with two types of securities law violations within the ICO space: (i) ICOs that meet the definition of a security but are sold, brokered or traded to U.S. investors without first complying with the registration requirements of federal securities laws and (ii) ICOs that are "outright frauds." He explained that the sponsors of many ICOs are located outside the U.S., making international cooperation critical in these cases.

Mr. Peikin underscored the importance of international collaboration to the agency's enforcement of the FCPA. Mr. Peikin emphasized that U.S. authorities should not "go it alone in fighting corruption," especially given that global markets have become increasingly interconnected. He added that the level of cooperation among regulators is on an upward trajectory, reporting that the SEC relies on its international partners to help develop cases.

Mr. Peikin also discussed the importance of international cooperation in pursuing cases related to fraud in microcap securities. He said that the SEC received assistance from its international partners in cases involving unregistered entities and insider trading cases, among others.

Mr. Peikin cautioned that despite the upward trajectory in international cooperation on enforcement matters, barriers to information exist, including data protection, privacy, confidentiality, bank secrecy, state secrecy or national security laws. He urged the SEC to address the effects of the European Union's new General Data Protection Regulation ("GDPR"). The GDPR implementation in Europe, according to Mr. Peikin, has the potential to limit aspects of the cooperative regime among the SEC, European securities, regulators and law enforcement on security-related matters. Mr. Peikin stated that another challenge which the SEC and its international counterparts must contend with is "human ingenuity and its application to wrongdoing."

Commentary

There wasn't much new in Mr. Peikin's speech but his comments about the challenges the SEC is facing that deal with the GDPR are interesting. Hopefully, the SEC will have a sympathetic ear for companies who are facing similar challenges as they navigate GDPR and similar issues while working to respond to SEC inquiries.

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