In a recent speech at the Practising Law Institute's annual SEC Speaks conference, Gurbir Grewal, the new director of the Division of Enforcement for the Securities and Exchange Commission (SEC or Commission), signaled several potential changes in the SEC's enforcement priorities under his new leadership. Of particular interest, Grewal stated that his division would "recommend aggressive use" of various remedies, most notably by seeking admissions of wrongdoing as a condition of settlement in certain instances.
Grewal comes to the SEC after a long career primarily as a state and federal prosecutor. He worked as an assistant U.S. attorney from 2004 to 2007 in the Eastern District of New York and again from 2010 to 2016 in the District of New Jersey, where he was the chief of the Economic Crimes Unit from 2014 to 2016. He then served as Bergen County prosecutor before he was appointed the 61st attorney general of New Jersey.1
In his SEC Speaks remarks, Grewal stressed the need to adjust enforcement policies to combat the American public's "historic[ally] low[]" confidence in "banks, technology companies, [and] big business."2 He partially attributed the public's mistrust to "repeated lapses by large businesses, gatekeepers, and other market participants, coupled with the perception that we - the regulators - are failing to hold them appropriately accountable, or worse still, the belief by some that there are two sets of rules: one for the big and powerful and another for everyone else."
Aggressive Use of Prophylactic Remedies Including Admissions of Wrongdoing
The longest and most detailed portion of Grewal's remarks was his announcement that the Enforcement Division will "recommend aggressive use" of "prophylactic" remedies, particularly for "recidivist" violators of the securities laws. These remedies include:
- Barring individual violators from serving as officers or directors of public companies in the future, even when they have not previously served in those roles
- Conduct-based injunctions, such as restrictions on stock trading or participating in securities offerings
- Imposing "undertakings" on corporate defendants to prevent future violations, including forcing companies to hire independent compliance consultants3
Perhaps most notably, however, Grewal also signaled that the Enforcement Division may be more aggressive in seeking admissions of wrongdoing from persons who settle with the SEC. Though he did not spell out a new policy in detail, Grewal...
