SEC Enforcement Keeps Pace with New Technology, SPACs, and Market Trends
As markets evolve and incorporate emerging technology in the financial sector, the SEC’s enforcement tools and priorities will also modernize to protect markets and investments. President Joe Biden's appointee for SEC Chairman, Gary Gensler, previously led the Commodity Futures Trading Commission (CFTC) during the Obama administration and is expected to continue focusing on cryptocurrency regulation, data modernization, and fintech regulation. He also has expressed support for increased disclosures around climate risk.
The rising popularity of Special Purpose Acquisition Companies (SPACs) is another example of an area where the SEC is expected to prioritize in response to market trends and evolution. Already the SEC’s Office of Investor Education and Advocacy (OIEA) has issued an Investor Bulletin detailing what a SPAC is and identifying considerations when investing in a SPAC both at its shell company phase and at the time the SPAC combines with the target company. And, in July 2021, the SEC announced more than $8 million in enforcement actions for the first time against a SPAC; the target company; their respective current and former CEOs; and the sponsor company, signaling that SPACs will be subjected to heightened scrutiny under the Biden administration.
For accounting and investment professionals to best serve clients, they will need to understand the unique compliance and litigation risks SPACs and their targets may create.