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Alternative Market Briefing

SEC focuses on pandemic related fraud

Friday, July 24, 2020

Bailey McCann, Opalesque New York:

The global pandemic has had a significant impact on the world economy and it's also impacting securities enforcement. According to the latest Securities Enforcement Update from law firm Gibson Dunn, the SEC is refocusing its supervisory priorities toward areas that could prove to be hotspots during a downturn.

In May, SEC Enforcement Co-Director Steven Peikin noted that enforcement would be looking closely at insider trading and market manipulation; accounting fraud; asset management; complex financial instruments and microcap fraud. According to the update, the SEC notes that financial managers are in positions where they may be privy to material non-public information about company performance which could lend itself to a higher rate of fraud while there is an informational asymmetry as a result of the pandemic. The SEC has also warned investors and managers about maintaining proper disclosures and honoring redemption requests in a timely manner.

According to the update, the SEC has already brought several enforcement actions against parties allegedly seeking to take advantage of the pandemic. Microcap fraud is on the rise. The Microcap Fraud Task Force and Office of Market Intelligence have suspended trading in the securities of over 30 issuers relating to allegedly false or misleading claims related to the coronavirus. The SEC has also brought enforcement actions against three companies for making false or misleading state......................

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