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Q&A: Sullivan & Cromwell’s Steve Peikin on securities enforcement

3 minute read

(Reuters) - The Securities & Exchange Commission is under new leadership, with Gary Gensler at the helm of the agency.

The agency hit the ground running this year, reversing policies put in place under former chairman Jay Clayton and launching an enforcement task force on environmental, social and corporate governance.

Steven Peikin, who co-led the agency's Division of Enforcement under the Trump administration, shared his thoughts with Reuters on what to expect from the SEC going forward. Peikin currently heads Sullivan & Cromwell's securities and commodities investigations and enforcement practice.

This conversation was edited for clarity and length.

REUTERS: Gensler took over as chair in April. What should we expect from him?

PEIKIN: Gary ran an aggressive enforcement program at the (Commodity Futures Trading Commission), and I would expect that you will see more of the same during his tenure at the SEC. The enforcement division at the SEC is probably the most visible part of the agency.

REUTERS: What type of investigations do you think we're going to see from the agency?

PEIKIN: When I was in the role, the chair was very focused on protecting the long-term interests of retail investors. And we also had to react to an explosion of a new asset class in the form of initial coin offerings, something which I didn't even know about before I came to the commission.

I think you're going to see a lot of attention focused on SPACs (special purpose acquisition companies) and on the market volatility events of earlier this year. Those are things that I think the public expects the SEC to look into.

REUTERS: What about the ESG enforcement task force?

PEIKIN: We haven't been operating under a prescriptive disclosure regime on issues around ESG, so it isn't the kind of thing where an investigator can say "you were required to disclose, A, B and C and you didn't, and therefore you've engaged in a violation."

Before they stood up this task force, they probably thought they had some things in the pipeline that would bear fruit.

I think they will also look at whether disclosures that are made around these issues by companies, even if not required, are incomplete, misleading or false.

REUTERS: Do you think the SEC will ratchet up fines?

PEIKIN: One of the things that was a source of some frustration to me when I was in the seat is there are a lot of constituents that measure the effectiveness of the enforcement division through two metrics.

One is how many cases did you bring in a particular period of time? And two, how big is the pile of financial remedies? And the reality is, you can't escape being measured that way.

Will fines and penalties and other financial sanctions go up? They may. The two biggest years for financial remedies in the history of the commission were 2020 and 2019. Aggregate penalties and disgorgement are driven by a very small number of (large) cases.

REUTERS: What's a better gauge of efficacy?

PEIKIN: There's a lot of money that's collected that because of an imperfect procedure wasn't being distributed to investors. We spent a lot of energy making it run more effectively and returned, on average, over a billion dollars in each of the years that we were there.

I think that’s a good measure. The job of the SEC in part is to remediate victim investors. And if you keep the money and don’t send it back, you’re not doing that part of the job.

Jody Godoy reports on banking and securities law. Reach her at jody.godoy@thomsonreuters.com

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