top of page

​

    

Corporate Governance Failures

 

​

SEC Brought Significant Actions in Traditional and Emerging Areas; Whistleblower Program Surpassed $1 Billion in Awards

​

The Securities and Exchange Commission today announced that it filed 434 new enforcement actions in fiscal year 2021, representing a 7 percent increase over the prior year. Seventy percent of these new or "stand-alone" actions involved at least one individual defendant or respondent. The new actions spanned the entire securities waterfront, including against emerging threats in the crypto and SPAC spaces.

 

For example, the SEC charged a company for operating an unregistered online digital asset exchange, charged a crypto lending platform and top executives alleging a $2 billion fraud, and brought an action against a special purpose acquisition company, its merger target, top executives, and others for alleged misconduct in a SPAC transaction. The SEC’s whistleblower program was critical to these efforts and had a record-breaking year.

 

The agency filed 697 total enforcement actions in fiscal year 2021, including the 434 new actions, 120 actions against issuers who were delinquent in making required filings with the SEC, and 143 "follow-on" administrative proceedings seeking bars against individuals based on criminal convictions, civil injunctions, or other orders. This represented a 3 percent decrease over the total actions filed in fiscal year 2020.

​

Fiscal year 2021 also was a record year for whistleblower awards, with the SEC awarding a total of $564 million to 108 whistleblowers. The whistleblower program also surpassed $1 billion in awards over the life of the program.

Overview of SEC Enforcement in Fiscal Year 2021

In fiscal year 2021, the SEC filed noteworthy enforcement actions across new areas, including a number of first-of-their-kind actions:

​

​

: SEC.gov | SEC Announces Enforcement Results for FY 2021

Corporate Formation, Governance and Legal Compliance

​

Accel IP Law 

 The health and expansion of present-day economies requires  nurturing the growth of new enterprises. This is why a substantial portion of Accel’s practice involves formation of businesses launching novel technology applications or creating new market opportunities.

​

We offer needed guidance to best structure new companies for their initial operations under the existing business regulatory environment, but we also consider the longer term plans, such as issuing shares in a corporation versus sharing profits among members of an LLC. Our corporate legal advice begins with selection of the corporate structure and a decision on the state in which the entity is to be organized.

​

With an understanding of the client’s business plan and intended funding sources, we tailor the formation documents to help manage the risks but this is not based on the governance structure alone. We advise on internal decision-making processes and distribution of management authority and responsibilities. We proactively discuss common management concerns and regulatory issues including, for example, compliance with state and federal securities laws which concern potential investors as well as reporting requirements.

 

Depending on the nature of the new business, a variety of other types of regulations may come into play. We offer to participate in business meetings to dialogue with officers and directors on legal requirements, potential risks and opportunities. 

​

Sometimes business innovation can cause a collision at the intersection of a new technology application and existing laws, raising new legal risks or violations which can impact both the business and its stakeholders personally. One of the higher profile examples is a SEC determination that most cryptocurrencies are securities and the intermediaries that help facilitate digital currency transactions must be registered with the SEC. Perhaps the most publicized case on this issue is pending.

 

See https://www.cnbc.com/2022/04/14/ripples-court-battle-with-sec-has-gone-exceedingly-well-ceo-says.html. Accel attorneys are experienced advisors on how federal and state securities  laws are applied to control investment in digital currencies and digital assets, including initial coin offerings, sale of tokens, stable coins, investment vehicles, and decentralized finance (DeFi) products.

bottom of page