The Securities and Exchange Commission (SEC) has formed a task force to strengthen and enhance its efforts to identify and combat cross-border fraud harming U.S. investors.
The “Cross-Border Task Force” will operate out of the SEC’s Division of Enforcement with an initial focus on investigating potential U.S. federal securities law violations related to foreign-based companies, according to an agency press release.
Specifically, the task force will be investigating potential market manipulation, such as “pump-and-dump” and “ramp-and-dump” schemes. Both phrases refer to schemes in which fraudsters attempt to drive up stock prices by spreading false or misleading information to create a buying frenzy, then sell off their own shares at the inflated price.
The task force also will focus enforcement efforts on “gatekeepers,” particularly auditors and underwriters, which help these companies access the U.S. capital markets. Additionally, it will examine potential securities law violations related to companies from certain foreign jurisdictions, such as China, where governmental control and other factors pose unique investor risks.
“We welcome companies from around the world seeking access to the U.S. capital markets,” SEC Chairman Paul Atkins said in the release. “But we will not tolerate bad actors – whether companies, intermediaries, gatekeepers or exploitative traders – that attempt to use international borders to frustrate and avoid U.S. investor protections. This new task force will consolidate SEC investigative efforts and allow the SEC to use every available tool to combat transnational fraud.
“I have also directed the staff in other SEC divisions and offices, including the Divisions of Corporation Finance, Examinations, Economic and Risk Analysis, and Trading and Markets as well as the Office of International Affairs, to consider and recommend other actions that would better protect U.S. investors, including new disclosure guidance and any necessary rule changes,” he added.
Division of Enforcement Director Margaret Ryan said, “The Cross-Border Task Force will leverage the Division of Enforcement’s resources and expertise to combat international market manipulation and fraud. We are pleased to be part of this critical effort to enforce the federal securities laws and protect U.S. investors.”