Washington D.C., Dec. 10, 2020 —
The Securities and Exchange Commission today announced that Division of Enforcement Director Stephanie Avakian will conclude her tenure by the end of the year. Ms. Avakian, who began her career at the SEC, leaves the agency after leading the Enforcement Division over the last four years as Co-Director and then Director.
During her tenure as Director, and previously as Co-Director alongside Steven Peikin, Ms. Avakian maintained the Division’s focus on protecting investors, addressing misconduct and market threats in a timely and effective manner, and improving the efficiency and effectiveness of the more than 1400-person Division, which has resulted in thousands of high-quality cases.
Under her leadership, the Division of Enforcement recommended and the Commission brought more than 3,000 enforcement actions, obtained more than $17 billion in financial remedies, returned approximately $3.6 billion to harmed investors, and paid awards of approximately $595 million to whistleblowers.
“I am incredibly proud of what the women and men of the Division of Enforcement have accomplished under Stephanie’s leadership. Her focus on the vigorous pursuit of quality cases, using the recourses of the Division to maximum effect has resulted in a program that is tough on violators, enhances the integrity of our markets, and puts the interests of our Main Street investors first,” said SEC Chairman Jay Clayton. “Stephanie’s leadership skills are unparalleled. Her deep knowledge of how the Commission works, combined with her personal connections with staff from across the country, have served to empower our investigators, accountants, data analysts, trial team members and other professionals to work collaboratively to produce exceptional work. With Stephanie leading the team, Enforcement also pivoted quickly to address critical emerging issues, acting decisively and deliberately. For example, Enforcement’s ability to root out potential misconduct amid the COVID-19 pandemic while also continuing its existing caseload, all in a virtual work environment, is a fitting testament to her leadership, expertise, and commitment to our mission. Working with Stephanie and her team on behalf of America’s investors has been an immense personal and professional privilege.”
“I am grateful to Chairman Clayton for giving me the opportunity to lead the Division, and the freedom and support to run an aggressive enforcement program,” said Ms. Avakian. “To everyone in the Enforcement Division, thank you. Thank you for your passion for our mission and your hard work on behalf of investors, particularly in the face of unprecedented challenges. Thank you, as well, for your good humor, and for the kindness you showed daily, to me and to each other. You made this an incredibly rewarding job, and I will miss working alongside you.”
Ms. Avakian approached the work of the Division guided by a single, overarching principle – that the Division’s vigorous, thoughtful enforcement of the federal securities laws is essential to the well-being of investors and to the integrity and fairness of our markets.
Protecting investors and market integrity
Under Ms. Avakian’s leadership, the Division of Enforcement brought investor-focused actions on conduct that spanned the securities markets, including a number of emerging market threats. The Division’s cases addressed novel misconduct ranging from schemes to trade based on hacked nonpublic information to fraudulent or unregistered initial coin offerings to complex market manipulation schemes.
At the same time, the Division continued to focus on areas that have traditionally been an important part of its enforcement efforts, including false and misleading disclosures, FCPA violations, insider trading, offering fraud, and unregistered offerings. The Division’s work under Ms. Avakian in these areas was marked by a willingness to take on particularly complex issues, including in a number of notable cases against public companies, financial institutions, and asset managers, as well as C-suite executives and other individuals. Illustrative cases include those against Tesla and Elon Musk, Theranos and Elizabeth Holmes, General Electric, former Congressman Christopher Collins, Facebook, Wells Fargo, Telegram, Goldman Sachs, and the Woodbridge Group and its founder Robert Shapiro. These cases alone resulted in financial remedies of over $4 billion, as well as a range of traditional and innovative remedial relief.
The Division’s investigations during this time led to a number of enforcement actions against major financial firms. This focus on aggressively policing Wall Street resulted in a series of cases against some of the world’s largest financial institutions – including Citibank, Deutsche Bank, JPMorgan Chase, and Merrill Lynch – for improper conduct that undermined market integrity in connection with the “pre-release” of American Depository Receipts, which ultimately resulted in the Commission ordering financial remedies of more than $430 million. Protection of market integrity also drove the Division to continue to investigate complex issues of market structure, which culminated in enforcement actions such as those concerning large broker-dealers’ disclosure failures related to their treatment of customer orders.
Another key structural issue was the problem of undisclosed conflicts of interest between clients and advisers. Under Ms. Avakian and Mr. Peikin, the Division conducted the Share Class Selection Disclosure Initiative to address the substantial number of investment advisers that had not disclosed to investors conflicts of interest created by obtaining fees for placing clients in higher-cost mutual funds share classes, where lower- cost share classes were available. As a result, roughly $140 million has been or is scheduled to be returned to investors. Through such cases against major companies and industry firms, the Division under Ms. Avakian ensured a fairer, safer market for all investors.
These cases came in addition to numerous enforcement investigations and actions concerning retail-level frauds that preyed on the perpetrators’ friends, family members, and members of their communities and other affinity groups. The victims of these schemes included members of identifiable communities such as military service members, teachers, seniors, African immigrants, and members of the Hispanic, Amish and Mennonite, and deaf, hard of hearing, and hearing loss communities, among others. The Division also successfully pursued organizers of numerous Ponzi schemes that sought to victimize investors of all types. Over the past four years, the Commission also protected investors by suspending trading in the securities of more than 1,000 issuers.
Across these substantive areas, during Ms. Avakian’s tenure, the Division focused on obtaining meaningful relief through timely action. This focus resulted in roughly 110 asset freezes in emergency actions to stop ongoing fraudulent conduct and freeze illicit profits in an effort to preserve funds for distribution to victims. Similarly, the Division emphasized individual accountability. More than two-thirds of enforcement actions under Ms. Avakian included charges against individuals, many of them at the top of the corporate hierarchy—including chief executive officers, chief financial officers, and chief operating officers—as well as gatekeepers including accountants, auditors, and lawyers.
Improving the Division’s effectiveness and efficiency
In order to ensure the Division focused on a wide range of risks in the most effective manner, Ms. Avakian sought ways to increase Division efficiency and took steps to maximize the use of resources. These efforts included process changes designed to increase the speed and effectiveness of complex investigations of financial fraud and issuer disclosures. These changes helped yield meaningful results, as the average duration of such cases declined over the most recent fiscal year.
Ms. Avakian also placed a particular focus on centralizing the Division’s efforts to distribute funds to harmed investors and streamlining the processes to award whistleblowers. In addition to returning over $3.6 billion to harmed investors over the course of Ms. Avakian’s tenure, the Division also took significant steps to streamline the processes for future fund distributions. For example, the Division established the Office of Bankruptcy, Collections, Distributions, and Receiverships to centralize existing functions and more efficiently compensate victims of misconduct. Ms. Avakian was instrumental in creating that new office, and in implementing changes to the Office of the Whistleblower to make the process of evaluating and issuing whistleblower awards substantially more efficient. This resulted in a substantial increase in the rate at which whistleblower claims are evaluated and awards are issued. Since December 2016, the Office of the Whistleblower has awarded approximately $595 million to eligible whistleblowers, including a record $175 million to 39 whistleblowers in fiscal year 2020, which represents both the highest dollar amount and the highest number of individuals awarded in any fiscal year. During Ms. Avakian’s tenure, the SEC issued the largest single award to date under the history of the program – $114 million to a single whistleblower – along with the five next largest awards.
Ms. Avakian also led a number of initiatives and processes to help the Division maintain the level of technological expertise necessary to protect investors from bad actors, including the creation of a new, centralized Cyber Unit to combat cyber-related threats and to address violations involving digital assets and distributed ledger technology. Under Ms. Avakian’s leadership, the Division significantly enhanced its ability to conduct sophisticated data analysis, including to detect insider trading, “cherry-picking” schemes, and potential accounting or disclosure violations.
Response to COVID-19
This combination of organizational agility, substantive focus, and strategic process innovations characterized the Division’s response to COVID-19 under Ms. Avakian. As the global pandemic took hold, Ms. Avakian reacted promptly to threats presented by COVID-19, as well as the ensuing dynamic market conditions. In February 2020, the Division began recommending to the Commission trading suspensions in the securities of companies where there were questions regarding the accuracy and adequacy of information in the marketplace. The Commission also brought seven COVID-related enforcement actions within the first year of the pandemic, six of which alleged fraud. Additionally, in the early stages of the pandemic, Ms. Avakian and Mr. Peikin issued a Statement Regarding Market Integrity that emphasized the importance of safeguarding, and preventing abuse or inappropriate disclosure of, material nonpublic information amid periods of great market volatility.
More broadly, Ms. Avakian convened and led the Coronavirus Steering Committee, through which they coordinated the Enforcement Division’s response to the threats presented by the COVID-19 emergency. The Steering Committee continues to generate and coordinate investigations concerning a wide variety of potential COVID-related misconduct.
Prior to her role as Director, Ms. Avakian served as Co-Director from June 2017 until August 2020 and as Acting Director from December 2016 to June 2017. Before that, she served as Enforcement’s Deputy Director beginning in June 2014. Before being named Deputy Director of the Enforcement Division, Ms. Avakian was a partner at Wilmer Cutler Pickering Hale and Dorr LLP, where she served as a vice chair of the firm’s securities practice and focused on representing financial institutions, public companies, boards, and individuals in a broad range of investigations and other matters before the SEC and other agencies.
Ms. Avakian previously worked in the Division of Enforcement as a branch chief in the SEC’s New York Regional Office, and later served as counsel to former SEC Commissioner Paul Carey. She received her bachelor’s degree from the College of New Jersey and a law degree from Temple University School of Law, both with high honors. For additional information about the work of the Enforcement Division under Ms. Avakian’s tenure, click here for her September 16, 2020 speech.
Deputy Director Marc P. Berger will serve as Acting Director upon Ms. Avakian’s departure.
This news item was originally published by the US Securities and Exchange Commission (SEC US). For more information, see the Source Link.