SEC Division of Enforcement Co-Director Peikin Describes Recent Efforts to Contend with Investor Risk

SEC Division of Enforcement Co-Director Steven Peikin described recent efforts to address the heightened risk to investors during the COVID-19 pandemic.

In a keynote address at the Securities Enforcement Forum West, Mr. Peikin highlighted the formation of a Coronavirus Steering Committee to coordinate the Division's response to the crisis. The Committee was set up "to proactively identify and monitor areas of potential misconduct, ensure appropriate allocation of our resources, avoid duplication of efforts, coordinate responses as appropriate with other state and federal agencies, and ensure consistency in the manner in which the women and men of the Division address coronavirus-related matters." Since its formation, the Coronavirus Steering Committee has:

• coordinated with the Division's Microcap Task Force and the Office of Market Intelligence to analyze the microcap market to "triage" matters for action;

• collaborated with the Division's Market Abuse Unit to watch trading activity for potential market manipulation, especially relating to issuer announcements that are from industries heavily affected by the coronavirus;

• developed a system to rapidly review public filings of highly impacted industries "with a focus on identifying disclosures that appear to be significantly out of step with others in the same industry";

• worked with the Division's specialty units, such as the Asset Management Unit and the Complex Financial Instruments Unit, to monitor the impact of the crisis on various industries for potential issues; and

• communicated with other regulators to coordinate efforts to protect investors.

Mr. Peikin also described efforts to communicate with investors and keep market participants updated on the coronavirus' impact on the market and the Division's response.

As a result of the Division's actions, Mr. Peikin stated that the SEC has (i) suspended trading in the securities of more than 30 issuers and in the stock of at least three microcap issuers and (ii) opened numerous investigations concerning possible COVID-19-related misconduct. Mr. Peikin noted that the Division is conducting investigations on an accelerated basis with regard to both (i) the accuracy of information on issuers and (ii) potential misconduct, due to the potentially negative impact on investors.

Mr. Peikin also provided an update on the Division's non-coronavirus-related activity. He acknowledged that there are difficulties caused by the crisis and explained that the staff has been directed to make reasonable accommodations when possible. He noted that the Division is "keenly focused" on matters with impending statute of limitations issues and stated that in cases where the SEC is not able to obtain tolling agreements, the Division will consider recommending an enforcement action to the Commission based on the existing record and seek to supplement its evidence with civil discovery.

According to Mr. Peikin, in comparison with the same time period last year, the Division has received 35 percent more tips, complaints and referrals, which he stated has resulted in the opening of "hundreds" of investigations.