The SEC’s Enforcement Division, in a statement from the Co-Directors, warned public companies and registrants to follow corporate controls and procedures during the pandemic. The Enforcement Division is “committing substantial resources to ensuring that our Main Street investors are not victims of fraud or illegal practices in these unprecedented market and economic conditions.” The Co-Directors specifically cited misuses of material nonpublic information especially with relief offered to delay public filings.
Financial crises have long regulatory tails. After the 2008 financial crisis, the Enforcement Division spent the next several years prosecuting hundreds of cases alleging wrongdoing during the crisis. The SEC has five years to file a case, and, in certain circumstances, may continue to bring cases thereafter. While we persevere through this crisis, make sure not to cut regulatory corners, and practice good corporate hygiene by documenting decisions and following procedures.