SEC Launches Task Force to Prevent Fraud Against Investors

The SEC is upping its efforts to fight cross-border fraud targeting American investors.

A new cross-border task force, announced by the Securities and Exchange Commission (SEC) Monday (Sept. 8), will initially focus on investigating possible securities law violations connected to overseas companies, including market manipulation such as “pump and dump” schemes.

“We welcome companies from around the world seeking access to the U.S. capital markets,” said SEC Chairman Paul S. Atkins. “But we will not tolerate bad actors—whether companies, intermediaries, gatekeepers or exploitative traders—that attempt to use international borders to frustrate and avoid U.S. investor protections.”

The task force will also focus on “gatekeepers,” like auditors and underwriters, that help companies access capital markets, and will also look into potential securities law violations connected to companies from foreign jurisdictions like China, “where governmental control and other factors pose unique investor risks,” the SEC said.

Atkins added that he has instructed staff in the commission’s various divisions to suggest other actions to protect investors, such as new disclosure guidance or any necessary rule changes.

The announcement follows last week’s news that the SEC and the Commodity Futures Trading Commission (CFTC) want to harmonize their regulations to offer markets greater clarity and strengthen U.S. capital markets. The two agencies plan to hold a joint roundtable later this month to discuss their regulatory harmonization priorities.

“It is a new day at the SEC and the CFTC, and today we reaffirm the need to ensure regulation does not stand in the way of progress,” Atkins and CFTC Acting Chairman Caroline D. Pham said in a joint statement. “By working in lockstep, our two agencies can harness our nation’s unique regulatory structure into a source of strength for market participants, investors and all Americans.”

In other financial regulation news, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued guidance last week that is designed to to encourage appropriate, voluntary cross-border information sharing between and among financial institutions, including appropriate foreign ones.

This information sharing can help financial institutions fight money laundering, terrorist financing and illicit finance activity involving drug trafficking organizations, foreign terrorist organizations and fraudsters, FinCEN said.

“The guidance clarifies that while financial institutions are prohibited from sharing Suspicious Activity Reports (SARs), as well as information that would reveal the existence of a SAR, the Bank Secrecy Act and its implementing regulations generally do not prohibit cross-border information sharing,” the regulator said in a news release.