While the world and markets are reeling, dealing with and adapting to the COVID-19 pandemic, the Securities & Exchange Commission’s (SEC’s) Division of Enforcement wants companies and individuals to know that it’s business as usual at the SEC.
This week, Stephanie Avakian and Steven Peikin, Co-Directors of the SEC’s Enforcement Division, issued a statement regarding the enduring importance of market integrity and compliance. While acknowledging the dynamic circumstances, the statement “emphasize[d] the importance of maintaining market integrity and following corporate controls and procedures.”
In particular, the statement warns that the Enforcement Division is on the lookout for an increase in insider trading. As companies respond to the COVID-19 pandemic, a larger number of corporate insiders may have access to valuable “material nonpublic information.” Moreover, if earnings reports or other SEC disclosures are delayed due to the coronavirus, those insiders must refrain from sharing that material nonpublic information longer than usual. The SEC warned that those with such access must remain mindful of their obligations to keep this information confidential and to refrain from trading on it, in violation of the antifraud provisions of the federal securities laws.
Regardless of the impact of the COVID-19 on any given business, public companies must be “mindful of their established disclosures controls and procedures, insider trading prohibitions, codes of ethics, and Regulation FD and selective disclosure prohibitions.” Similarly, broker-dealers and other must comply with policies and procedures designed to prevent the misuse of material non-public information.
The cautionary statement concludes with a commitment by the Enforcement Division to dedicate “substantial resources” to ensuring that “investors are not victims of fraud” and to “maintaining confidence in the fairness and integrity of the markets.” Put simply, the SEC does not view the COVID-19 pandemic as an invitation to shirk compliance, ethics and disclosure obligations.
Jenna Voss and Stacy Fresch, both partners at Forensic Risk Alliance, contributed to this blog.