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The SEC is set to intensify investigations, enforcement in the Biden era



Companies should expect more aggressive regulatory and investigative activity from the US Securities and Exchange Commission under the Biden administration, with specialty companies or SPACS, which will certainly be a focus area, experts say.

If confirmed, the increase in regulatory measures for listed companies and others falling within the SEC's regulatory area will contrast with the agency's work under the Trump administration, they say.

"The SEC has been unusually quiet for the past four years," said Boris Feldman, a partner and director of U.S. technology, litigation and arbitration for Freshfields Bruckhaus Deringer LLP in Menlo Park, California.

"There is a lot of pent-up energy among staff to take action in recent years," he said.

Significantly fewer enforcement actions were taken by the SEC during the Trump administration compared to the Obama administration's eight years, with a minor n indictment for insider trading and other issues, says Peter M. Gillon, partner, insurance recovery and advisory, for Pillsbury Winthrop Shaw Pittman LLP in Washington.

But the SEC run by a Biden nominee is not likely to be just a return to the Obama years, he said, noting that the agency under President Obama was criticized for not aggressively persecuting individuals.

"There will be a renewed effort to follow the wrong ones," Gillon said.

Acting SEC Chairman Allison Herren Lee's statement on February 9, which restored the strength of senior officials in the agency's enforcement department to approve formal investigation orders, probably points to a more robust and active agency, says Ronald L. Ohren, advisor to Baker & McKenzie LLP in Chicago and chairman of its disputes in North America and the agency's insurance practices.

The authorization was introduced by the Obama administration but revoked during the Trump administration. [1

9659002] Fru. Lee said in the statement that the restoration "will enable investigative staff to act more quickly to detect and stop ongoing fraud, preserve assets and protect vulnerable investors."

The confirmation meeting for President Biden's candidate for SEC President, Gary Gensler, is scheduled for next week.

SPACs will certainly be a major focus for the SEC, experts say.

The so-called "blank check companies" are shell companies formed to raise capital to acquire existing companies and usually have two years to make an acquisition. The structures make it possible for companies to be listed on the stock exchange without going through a traditional IPO.

According to SPACInsider, a website that tracks SPAC, there have been 298 SPAC IPO transactions this year as of Friday, compared to 248 for the whole of 2020.

Last week, Paul Munter, SEC's acting auditor, said that Market participants should carefully consider whether a SPAC's target company "has a clear and comprehensive plan to be prepared to be a public company." The Agency has also released a statement on issues that should be considered before a private operating company conducts a business combination with a SPAC.

The SEC has already launched an investigation into SPACS and is seeking information from investment firms on how to deal with

Regulators will not wait for a disaster involving SPAC to occur before taking meaningful action, says Toby M. Galloway, shareholder and co-chair, securities litigation and enforcement, at Winstead PC in Fort Worth, Texas. [19659002] "There is a lot on the legislative and enforcement agenda because there are so many opportunities for abuse throughout the process," he said.

Kevin LaCroix, vice president of Beachwood, Ohio, for RT ProExec, a division of RT Specialty LLC, said it is difficult to say whether the SEC is ready for more regulatory guidance or enforcement action for SPAC, but requests for information signal that it will be an area of ​​scrutiny.

Observers say another area of ​​interest for the SEC may be environmental, social and corporate governance information, which relates to climate change, diversity and other issues.

In March, Lee requested input from investors and others on whether current information is sufficient in light of the growing demand for information on climate change.

The SEC also announced that it was responding to investor demand by launching a new page on its website to bring together information on the Agency's actions and the latest ESG investment information.

Mr. Galloway said that "it will be very interesting to see" if Mr. Gensler, if confirmed, will leave the ESG issue to Congress, or pursue it through regulation or enforcement. The agency is currently looking for cases where companies may not have sufficiently revealed the risks of climate change, he added.


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