On September 5, the U.S. Securities and Exchange Commission (SEC) announced the formation of a Cross-Border Task Force. This initiative aims to enhance the Division of Enforcement’s capabilities in identifying and combating cross-border fraud that adversely affects U.S. investors. As global markets become increasingly interconnected, the SEC’s proactive approach underscores its commitment to safeguarding the integrity of U.S. capital markets.
Focus Areas of the Task Force
The Cross-Border Task Force will initially concentrate on investigating potential violations of U.S. federal securities laws by foreign-based companies. Particular attention will be given to market manipulation schemes such as “pump-and-dump” and “ramp-and-dump,” which can significantly harm investors. Additionally, the task force will scrutinize the role of gatekeepers, including auditors and underwriters, who facilitate these companies’ access to U.S. capital markets. This focus is crucial, as these intermediaries play a pivotal role in maintaining market integrity.
The task force will also address securities law violations associated with companies from foreign jurisdictions, notably China, where governmental control and other unique factors pose heightened risks to investors. By examining these risks, the SEC aims to ensure that international borders do not become barriers to effective enforcement and investor protection.
Statements from SEC Leadership
SEC Chairman Paul Atkins emphasized the agency’s openness to global companies seeking access to U.S. markets, while firmly stating that bad actors exploiting international borders to circumvent U.S. investor protections will not be tolerated. Chairman Atkins highlighted the task force’s role in consolidating SEC investigative efforts and utilizing all available tools to combat transnational fraud. Division of Enforcement Director Margaret Ryan expressed enthusiasm for the task force, noting its potential to leverage the Division’s resources and expertise in combating international market manipulation and fraud.
In addition to the Division of Enforcement, Chairman Atkins has directed other SEC divisions and offices, including the Divisions of Corporation Finance, Examinations, Economic and Risk Analysis, and Trading and Markets as well as the Office of International Affairs to explore additional measures to protect U.S. investors. These measures may include new disclosure guidance and necessary rule changes, demonstrating a comprehensive approach to investor protection.