Duly Noted: Quotes and quips from a year in enforcement and regulation

Julie DiMauro shares a few of her favorite statements from a truly robust year of regulation and enforcement activity.

In the course of following compliance trends and regulatory developments in 2023, one can stumble on some pretty creative expressions of opinion.

I sometimes find myself looking for the dissenting statements before I read the finalized rule from the SEC, enjoying how Commissioner Hester Peirce alludes to her savvy nieces and Taylor Swift to illustrate a point about the SEC’s Consolidated Audit Trail’s funding model.

It doesn’t matter if you agree with the Commissioner or not – it’s still fun to imagine telling your employer in a public record that its majority decision on any given topic is “ahistorical, unjustified, unlawful, impractical, confusing, and harmful”.

Who says securities regulation cannot be colorful? Here are a few of my favorite quotes and quips from last year, in no particular order.

1. Gurbir Grewal and Lisa Monaco

The DOJ and the SEC spent significant time this year reminding businesses of the importance of self-reporting, cooperating and remediating to earn a better enforcement outcome. In a case against 10 firms for what the SEC called “widespread recordkeeping failures” associated with their electronic communications, Gurbir Grewal, Director of the SEC’s Division of Enforcement, said: “One of the orders included in today’s announced actions is not like the others. There are real benefits to self-reporting, remediating and cooperating.”

Gurbir Grewal.
Photo: SEC

The company singled out had self-reported, plus begun a robust program of remediation, paying considerably less as a fine thereby.

And, speaking on behalf of her agency about the corporate enforcement policies of the DOJ’s various divisions, Deputy Attorney General Lisa Monaco said: “[E]very DOJ component engaged in corporate criminal enforcement now has a voluntary self-disclosure policy. So, when companies promptly disclose misconduct, fully and in a timely manner, they can take advantage of the program’s benefits in any type of case, in any part of the Department, an in any part of the country.”

Deputy Attorney General Lisa O. Monaco
Deputy Attorney General Lisa O. Monaco. Photo: Anna Moneymaker/Getty Images

2. Kenneth Polite

Since regulatory and enforcement authorities in the US could only be called “energetic” in 2023, like the year prior, it is no surprise that leaders from the agencies acknowledged it. One person who did it with pride and carefully explained why, reminding audiences that he once served as a chief compliance officer himself, was former Assistant Attorney General Kenneth Polite.

In a speech earlier this year, Polite said: “There may be some who question why the department is announcing so much policy in this space. Does all of this have to happen now?

DOJ Assistant AG, Kenneth A. Polite, Jr.
Former DOJ Assistant AG, Kenneth A. Polite, Jr. Photo: Anna Moneymaker/Getty Images

“My response is that there is no better time than right now. Are we to shy away from the problems posed by the increased use of new ways to communicate in our personal and professional lives? Are we to ignore the problems posed by companies that fail to recognize the clear connection between compensation and compliance? Are we to run away from the problems posed by the glaring lack of diversity across our profession?

“No, now is to the time for the department to step forward to solve these problems. Doing so right now may lead a company to start revising its compliance policies. It may empower a whistleblower to call the hotline and report alleged wrongdoing. It may give voice to a compliance professional to better advocate for critical resources. It may result in that individual employee making the right, rather than the wrong, ethical decision in the workplace.”

SEC Commissioners Hester Peirce and Mark Uyeda. Photo: SEC

3. Hester Peirce and Mark Uyeda

In a dissent to an SEC consent order in September, brought against the company Stoner Cats 2 LLC for its unregistered offering of crypto asset securities in the form of non-fungible tokens (NFTs), Commissioners Hester Peirce and Mark Uyeda said: “This enforcement action involves activity we believe constitutes fan crowdfunding – a common phenomenon in the world of artists, creators and entertainers.”

Their point was that, enhanced for the digital age, the Stone Cats NFTs are not that different from the Star Wars collectibles sold in the 1970s. “Using the analysis of today’s enforcement action, the SEC should have parachuted in to save those kids from Star Wars mania,” they said.

Photo: Stoner Cats

Ian McGinley.
Photo: CFTC

4. Ian McGinley

In a punny play on words that easily could have been missed on a busy weekday in October, CFTC Enforcement Director Ian McGinley issued a short statement about a company charged with attempting to manipulate the price of oats futures contracts.

“If Ceres thought it could roll the oats market without consequence, it was mistaken. The CFTC will act decisively to protect all its agricultural markets, as well as the producers, market participants, and consumers who rely on them,” he said in the CFTC’s press release.

5. The Health and Human Services Department’s Office of the Inspector General

Although not exactly entertaining, some statements that hit the bullseye for many compliance officers – if they caught wind of it – came from an unexpected and understated source: The Health and Human Services (HHS) Department’s Office of the Inspector General.

In a document called General Compliance Program Guidance that HHS released last month, the OIG advises individuals and businesses in the healthcare industry about the agency’s enforcement priorities and evolving expectations regarding compliance programs.

Its incredible specificity makes it not only useful – but downright show-your-boss quotable for compliance professionals working in any industry sector.

The OIG begins by saying these HHS-regulated entities should have a compliance officer, a compliance committee, and board compliance oversight, plus ensure the compliance program is integrated throughout the organization and its subsidiaries and affiliates.

But more pointedly it also says (drumroll, please): “[T]he compliance officer should not lead or report to the entity’s legal or financial functions and should not provide the entity with legal or financial advice or supervise anyone who does. The compliance officer should report directly to the CEO or the board.”