The Securities and Exchange Commission closed fiscal year 2023 on Sept. 30 with a flurry of enforcement filings. A few things stand out, including a sharp increase in cryptocurrency and other digital asset enforcement actions, which far outstrips the agency’s activity in this space in earlier years. There was also a pronounced jump in enforcement focus on corporate internal controls, continuing a trend that started last fiscal year. Meanwhile, the SEC paid record whistleblower awards and stepped up its whistleblower protection efforts, highlighting their importance to the SEC’s enforcement program. On the other hand, ESG enforcement activity appeared to wane, which contrasts with the prominence SEC officials have given to ESG issues in speeches and proposed rulemaking. And SEC administrative proceedings suffered more blows in court challenges, which, while not appearing to slow the pace at which the SEC is filing enforcement cases, could have implications for the SEC’s efforts to regulate the professionals who practice and appear before it.
The Securities and Exchange Commission doesn’t regulate everything a public company does. Or does it?
SEC practitioners are grappling with that question in the wake of the agency’s recent $35 million settlement with video game developer Activision Blizzard, where the SEC leveraged an inconspicuous internal controls rule to sanction alleged corporate conduct that had no evident impact on the company’s public reporting. Despite the hefty civil penalty, the Activision settlement does not entail allegations of fraud or deceit, or that Activision misstated or omitted anything at all. There are also no allegations that investors were harmed or put at risk.