%1

Gary Gensler, President Biden’s pick to run the Securities and Exchange Commission, is expected to seek higher fines and new disclosure requirements on public companies, lawyers and former regulators say, the Wall Street Journal reported. Biden nominated Gensler earlier this month to head the agency that oversees U.S. securities markets, succeeding Jay Clayton. The Senate needs to confirm his choice for it to take effect, a process for which there is still no confirmed timeline. Last week, Biden named SEC Commissioner Allison Herren Lee to serve as acting chairwoman in the interim. Gensler headed the U.S. Commodity Futures Trading Commission from 2009 to 2014, at which time he spearheaded the creation of a new regulatory framework for derivatives. Prior to running the CFTC, he had spent 18 years at Goldman Sachs Group Inc., where he rose to co-head of finance, and later served in the Treasury Department during the Clinton administration. If confirmed, Gensler will likely be tasked with toughening regulation of U.S. public companies and the finance industry. Although he hasn’t outlined his plans for the role yet, his reputation as a bold regulator makes it likely he will beef up enforcement efforts and push for new disclosure rules, lawyers and former regulators said. Finance chiefs already anticipate spending more time and money to comply with new disclosure requirements in the next few years, said Howard Berkenblit, a partner at law firm Sullivan & Worcester LLP. “They’re bracing themselves for more regulation,” he said.

President-elect Joe Biden has chosen two veteran regulators to lead the Securities and Exchange Commission (SEC) and the Consumer Financial Protection Bureau (CFPB), The Hill reported. Biden will nominate former Commodity Futures Trading Commission (CFTC) chairman Gary Gensler to lead the SEC and Federal Trade Commission member Rohit Chopra to lead the CFPB, the transition announced Monday. Under the Obama administration and in the wake of the 2008 financial crash, Gensler advanced derivatives regulation at the CFTC, Bloomberg News noted. Biden last year called on Gensler to lead his transition’s review of banking and securities regulators. Chopra, who Biden has put forward to lead the CFPB, helped Massachusetts Sen. Elizabeth Warren (D) establish the office prior to her time serving in the upper chamber. Chopra served as a CFPB assistant director and as student loan ombudsperson after the agency was launched in 2011. He has served as a Federal Trade Commissioner since 2018.

President-elect Joe Biden is expected to choose Gary Gensler, a former financial regulator and Goldman Sachs Group Inc. executive, to head the Securities and Exchange Commission, the Wall Street Journal reported. Gensler’s nomination would please liberal Democrats who cheered the former regulator’s tough approach to rule-making during the Obama administration, when he spearheaded the overhaul of derivatives markets mandated by the 2010 Dodd-Frank Act and oversaw enforcement actions against investment banks accused of manipulating benchmark interest rates. As head of the Commodity Futures Trading Commission from 2009 to 2014, Gensler developed a reputation among his colleagues for bare-knuckle tactics as he drove to create a regulatory framework for derivatives, a multi-trillion dollar market that had largely been free from federal oversight. By the time he left the commission, the rule set was largely complete, years before other regulators wrapped up their postcrisis work.

President Trump on Monday named Elad Roisman acting chairman of the Securities and Exchange Commission (SEC), the agency announced, The Hill reported. Roisman, a Republican, was nominated by Trump and confirmed to the SEC in 2018 after serving as the chief GOP counsel on the Senate Banking Committee. He succeeds former Chairman Jay Clayton, who was appointed to the SEC by Trump and led the investment regulator since May 2017. Clayton, whose SEC term expires in 2021, said in November that he would resign from the SEC at the end of 2020. His announcement came months after Trump nominated Clayton to replace Geoffrey Berman, the former U.S. attorney for the Southern District of New York. While Clayton had sought to remain in the Trump administration while returning home to New York, his lack of prosecutorial experience and the controversy of Berman’s firing derailed his nomination. He had been a partner at law firm Sullivan & Cromwell before joining the SEC, specializing in Wall Street mergers, acquisitions and stock offerings.

The U.S. Securities and Exchange Commission’s whistleblower program set annual records, awarding more money to more tipsters in fiscal 2020 than in any other year of the program’s history, the Wall Street Journal reported. The volume follows efforts by the regulator to speed up payouts to whistleblowers after years of complaints that it was slow to dole out awards. “We are sending the message to people that if you bring us high-quality tips, we’re going to dig into them, and pursue actions with vigor, and then we’re going to get you a whistleblower award promptly,” SEC Chairman Jay Clayton said in an interview last Thursday. Clayton announced yesterday that he plans to step down at the end of this year. The SEC’s Office of the Whistleblower issued about $175 million to 39 individuals in the fiscal year ended Sept. 30, according to the office’s annual report to Congress, which was published Monday. The total dollar amount was 4 percent higher than the previous record—about $168 million in fiscal 2018—and almost three times the total issued in fiscal 2019, when $60 million was distributed to eight individuals. In the most recent fiscal year, the whistleblower’s office also issued a record 315 preliminary determinations of award claims detailing whether a tipster’s claim should be approved or denied, which is 96 percent more than the previous record, set in 2014—when the majority of the preliminary orders were denials issued to one claimant, according to the report.

The Securities and Exchange Commission charged former Wells Fargo CEO John Stumpf and retail banking head Carrie Tolstedt with misleading investors, the watchdog announced on Friday, Reuters reported. The agency claimed that the former executives misled investors about the widespread sales practice problems at the bank. Stumpf agreed to pay a $2.5 million penalty to settle the charges, while the SEC will litigate fraud charges against Tolstedt in court. A lawyer for Stumpf did not immediately respond to a request for comment. An attorney for Tolstedt said she was an “honest and conscientious executive,” and the SEC charges are “unfair and unfounded.” The new charges mark the latest in a long-running set of legal and regulatory woes for the bank and its former leadership, after the firm was embroiled in a massive scandal over the creation of fake accounts by employees. In February, the bank agreed to pay $3 billion to settle a joint probe by the SEC and Justice Department. Stumpf and Tolstedt have faced individual sanctions as well. Stumpf was barred from the banking industry and fined $17.5 million by a banking regulator in January, and Tolstedt is facing a $25 million fine which she is fighting in court. Read more. 

In related news, Jay Clayton, the former corporate deal lawyer who has led the Securities and Exchange Commission since 2017, is stepping down as chairman at the end of the year, the New York Times reported. The S.E.C. pursued 3,152 enforcement cases during Clayton’s tenure, slightly more than brought by Mary Jo White from 2013 to 2017. The Clayton era also saw $16.8 billion in financial remedies, again slightly more than under White. NPR reported that the S.E.C. brought just 32 insider-trading enforcement actions last year, the fewest since 1996. Read more. 

The U.S. Securities and Exchange Commission collected a record $4.7 billion in fines in fiscal 2020, buoyed by several large settlements even as agents were forced to work remotely for a large part of the year due to the COVID-19 pandemic, Reuters reported. The SEC reported on Monday that it assessed $1 billion in penalties and ordered $3.6 billion in ill-gotten funds disgorged across 715 separate cases. A handful of sizeable cases drove the bulk of the agency’s collections, including when it ordered Telegram Group Inc to return $1.2 billion to investors and pay an $18.5 million penalty to resolve charges that it offered an unregistered digital token coin offering - the company neither admitted nor denied the SEC’s claims. Other hefty fines include a $500 million penalty against Wells Fargo as part of a joint Justice Department investigation into its sales practices, and a $45 million penalty against Bausch Health, formerly Valeant Pharmaceuticals, for misleading disclosures. 

The Securities and Exchange Commission (SEC) has awarded a whistleblower more than $114 million, the agency announced Thursday, its highest reward for information that led to a successful crackdown, The Hill reported. The whistleblower was awarded $52 million for aiding the SEC and another $62 million for helping another unidentified agency with a related enforcement action. The award is more than twice the previous record payout for a whistleblower, set at $50 million in June 2020. The 2010 Dodd-Frank Wall Street reform law empowered the SEC to offer financial rewards to whistleblowers who give the agency “original, timely, and credible information” that leads to a successful enforcement action. The SEC has paid out roughly $676 million to 108 whistleblowers since 2012, according to the agency, all drawn from a pool funded by penalties paid for securities law violations.

The U.S. Securities and Exchange Commission adopted changes that relax some conflict-of-interest rules for companies and audit firms, making it easier for them to avoid violating auditor independence in certain situations, the Wall Street Journal reported. The amendment, passed by the SEC on Friday, gives auditors more discretion in assessing conflicts of interest in their relationships with the businesses they audit, in situations such as those involving affiliates of their clients or past lenders. The rule also intends to lessen the burden for companies trying to go public. The SEC, however, said that the changes won’t loosen the requirements but rather boost audit quality by increasing the number of qualified audit firms from which a company can choose. “These modernized auditor independence requirements will increase investor protection by focusing audit clients, audit committees and auditors on areas that may threaten an auditor’s objectivity and impartiality,” said SEC Chairman Jay Clayton. An SEC official said that the amendment won’t result in any changes to the scope of an audit firm’s services or to a company’s approach to financial statements. SEC Commissioners Caroline Crenshaw and Allison Herren Lee opposed the changes, saying that they introduce greater opportunity for error and uncertainty and reduce investors’ visibility into how auditors make judgments. The regulator had proposed the revisions last December. The new rule revises the definition of affiliates of an audit client, which states that the independence rules governing an auditor of a portfolio company also extend to any other portfolio company controlled by the same private fund. The amendment allows companies and auditors to determine whether another portfolio company under the fund is material to the fund. If they determine it isn’t material, the other portfolio company wouldn’t be considered an affiliate under the rule.