SEC Braces For Market Manipulation Crackdown, Expands Staff's Power To Start New Probes

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by Tyler Durden
Tuesday, Feb 09, 2021 - 03:25 PM

In a move that can only be described as extremely overdue, the Securities and Exchange Commission (remember them? they used to regulate the farce that is US capital markets) may actually get back to doing their job. The regulator announced on Tuesday that it is going to "give more power to its enforcement staff to launch investigations," according to the Wall Street Journal.

The timing couldn't be better: the stock "market" has completely detached itself from even the faintest semblance of economic reality, fraudulent companies are running amok and investor appetite for speculation - and in the case of new Robinhood traders, blind speculation - has never been higher. 

The SEC's new initiative will allow more enforcement supervisors to authorize investigations, which will allow 36 senior regulators to subpoena companies and individuals for records or testimony. The report notes that this is a stark difference this was from the SEC under the Trump administration:

The agency during the Trump administration withdrew that authority from supervisors and allowed only two officials to approve new probes, saying it would result in more consistent decisions about which tips and complaints justified investigations.

SEC acting Chair Allison Herren Lee commented: “Returning this authority to the division’s experienced senior officers, who have a proven track record of executing it prudently, helps to ensure that investigative staff can work effectively to protect investors.” 

New investigations plunged under the Trump administration, falling from 1,063 in 2016 to 827 in 2019. Completed enforcement actions also plunged from 548 in 2016 to 405 in 2020, WSJ notes.

SEC acting Chair Allison Herren Lee formerly worked for the SEC based out of Denver and is holding the position until Biden's official nomination of Gary Gensler - which we documented here - is consummated.  We noted last month that the potential appointment of Gary Gensler to head of the Securities and Exchange Commission reportedly has Wall Street on edge.  Gensler, Bloomberg noted, went "from being one of the youngest partners in the history of Goldman Sachs Group Inc. to becoming a favorite of progressive Democrats."

His arrival will likely be a stark difference from the last 4 years of Jay Clayton, as Gensler's resume includes going to war with major financial titans when he was head of the Commodity Futures Trading Commission - and winning. Financial lobbyists sometimes simply called him "the enemy" during the 2010 Dodd-Frank Act battle. 

Justin Slaughter, a consultant at Mercury Strategies, said: "The sheriff is coming to the preeminent financial regulator in the world. It means regulation and enforcement are about to get much tougher.”