Three Noteworthy Trends from SEC’s Latest Enforcement Push

September is the month when temperatures start dropping, leaves start turning, and the Securities and Exchange Commission starts enforcing.

To be fair, the SEC enforces securities law all year round, but the agency has made the September flurry of enforcement activity an annual tradition in the final month of its fiscal year. Twelve months ago, the securities cops were making a late push to chase down unregistered NFT crypto offerings and violations of whistleblower protections. What trends stand out in the 2024 enforcement frenzy? Here are three.

Sweeps

Think of this as the SEC’s version of “shock and awe” for its enforcement priorities. By announcing a slew of charges for the same violations all at once (or in quick succession), the agency communicates to companies that the allegations of misconduct aren’t isolated incidents. Translation: Get serious about compliance.

Some of the most recent sweeps include the SEC charging seven publicly traded companies with violating whistleblower protection rules through employment and related agreements. In a memo on the latest news, law firm Davis Polk pointed out that two of cases involved consulting agreements – a reminder that the protections extend beyond just employees.

Meanwhile, the SEC continued its campaign to crack down on off-channel communications among financial professionals. Additionally, the agency tagged nine registered investment advisers with violations of its marketing rule.

Promoting the Benefits of Cooperation

As SEC Division of Enforcement Director Gurbir Grewal has prioritized cooperation in SEC investigations, recent enforcement outcomes have demonstrated how companies can benefit from the policy.

For example, in announcing charges of accounting fraud against a former executive at CIRCOR International Inc., the agency pointed out that even though CIRCOR fell short in efforts to “to devise and maintain sufficient internal accounting controls,” self-reporting financial violations got the company off the hook for civil penalties. Similarly, in deciding not to impose civil penalties against Portland General Electric Company related to charges of internal accounting and disclosure controls violations, the SEC said it gave the company credit for “substantial cooperation and extensive remedial measures.”

Stalled Rulemaking Won’t Keep the SEC Down

The Supreme Court’s decision this summer to overrule the Chevron doctrine threw a wrench into the rulemaking process for agencies across the federal government’s executive branch. The decision had a pronounced impact on the SEC’s ambitious rulemaking agenda, which included the landmark Climate-Related Disclosure Rule. However, it hasn’t stopped the agency from undertaking enforcement on relevant environmental, social and governance matters.

In one such case, the SEC took on Keurig Dr Pepper Inc. over charges the company made “inaccurate statements regarding the recyclability of its K-Cup single use beverage pods.” Apparently, the agency objected to Keurig’s failure in some of its annual reports to mention negative feedback provided by multiple recycling companies about the pods. In an analysis of the enforcement action, which resulted in a $1.5 million settlement by Keurig, lawyers at WilmerHale said the case offered “an important reminder of the SEC’s continued focus on environmental and social disclosures and the agency’s willingness to look outside of SEC filings for additional context surrounding such disclosures.”

Do the SEC’s September priorities offer a view into its focus over the next 12-months?  Only time will tell.