SEC Establishes Unit to Investigate Deceitful Financial Practices by International Firms
The United States Securities and Exchange Commission (SEC) has announced the formation of a new unit, the cross-border task force, with a mandate to investigate securities fraud by foreign companies, their auditors, and underwriters.
The SEC, under the leadership of Chairman Paul Atkins, has expressed concerns about foreign companies attempting to evade US investor protections. The existing rules on foreign private issuers allow US-listed foreign companies certain breaks on US disclosures and reporting requirements. However, the SEC is not willing to tolerate any attempts to circumvent these investor protections.
The focus of the cross-border task force will be on foreign jurisdictions that pose unique investor risks, particularly China. Pump-and-dump schemes and extreme market moves leading to ramp-and-dumps are identified risks associated with foreign companies targeting US investors.
In response to these concerns, the SEC is considering new measures to address securities fraud by foreign companies. These measures may include new disclosure guidance to protect US investors. The SEC has also asked for early public feedback on whether to revisit existing rules on foreign private issuers.
In addition to the SEC's efforts, the Nasdaq Inc. has announced revamping its listing rules to prevent wild market swings, including from Chinese companies listed on the exchange. The Nasdaq also aims to accelerate the process for suspending and de-listing companies.
Paul Atkins, Chairman of the SEC, has directed other parts of the SEC to develop ways to protect US investors. This includes the appointment of Margaret "Meg" Ryan, a military judge, as the head of the SEC's enforcement division in August.
The SEC's cross-border task force will focus on securities fraud by foreign companies, including those from China, and will investigate auditors and underwriters. The task force is expected to play a crucial role in ensuring that US investors are protected from securities fraud, regardless of the origin of the companies involved.
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