SEC Chair Gensler Warns of Heightened Consequences for Misconduct

SEC Chair Gary Gensler warned that any company engaging in misconduct that harms investors will face severe consequences.

In remarks at the Practising Law Institute, Mr. Gensler said that penalties should function as a deterrent rather than a cost of doing business. He highlighted a major recordkeeping enforcement against a large U.S. bank in which the SEC imposed a fine 10 times larger than previous similar settlements to serve as a warning to market participants that "did not act as if they got the message." (See previous coverage.) The SEC subsequently conducted a sweep for similar misconduct and charged 16 firms with penalties totaling upwards of $1.1 billion.

Mr. Gensler said that companies that comply with SEC investigations may receive favorable settlement terms, referring to a settlement in which the company remedied the error prior to SEC intervention and cooperated with the investigation. In that instance, Mr. Gensler said, the settlement carried no monetary penalty. He said that knowing when to pursue an enforcement is equally important, emphasizing that the SEC will not pursue enforcement "[i]f the facts and the law merit we do not make a case." Mr. Gensler encouraged companies to admit when a violation occurs and take swift action to remedy it if possible, saying that "[i]f you mess up—and people do mess up sometimes—come in and talk to us, cooperate with our investigation, and remediate your misconduct."