Gensler detailed the commission’s work at the 2023 Securities Enforcement Forum held Wednesday, Oct. 25, where he also announced the SEC directly contributed to the distribution of $930 million to investors harmed by bad actors.
“When I spoke with you two years ago, I shared what the SEC’s first chair, Joseph Kennedy, said in his first speech: 'The Commission will make war without quarter on any who sells securities by fraud or misrepresentation,’” Gensler said. “In a subsequent speech, just four months later, Kennedy emphasized: ‘We are not prosecutors of honest business, nor defenders of crookedness. We are partners of honest business and prosecutors of dishonesty. We shall not prejudge, but we shall investigate.’”
Gensler’s remarks were separated into five distinct pillars each focusing on a different area of consumer protection. As such, the chairman covered “economic realities,” “accountability,” “high-impact cases,” “process” and “positions of trust” during his speech.
In order to execute the SEC’s mission, Gensler said it is imperative to effectuate Congress’s purpose to emphasize the objectivity of law as it pertains to the realities of the financial products in the purview of the commission.
“There is nothing about the crypto asset securities markets that suggests that investors and issuers are less deserving of the protections of our securities laws,” he said as he discussed those realities. “Congress could have said in 1933 or in 1934 that the securities laws applied only to stocks and bonds. Yet Congress included a long list of items in the definition of a security, including ‘investment contracts.’”
With that in mind, Gensler pointed to the seminal Supreme Court Howey decision that shaped how investment contracts are treated in U.S. courts—that one exists when money is invested in a “common enterprise” and there is a “reasonable expectation” profits will be made due to the efforts of other people.
“As I’ve previously said, without prejudging any one asset, the vast majority of crypto assets likely meet the investment contract test, making them subject to the securities laws,” he said.
From X (previously known as Twitter)
Kohn, Kohn & Colapinto @KKCWhistleblow ·Oct 26
"During remarks at the 2023 Securities Enforcement Forum, SEC Chair Gary Gensler revealed that the SEC #Whistleblower Program received a record 18,000 whistleblower tips in the 2023 Fiscal Year. https://kkc.com/securities/gensler-reveals-sec-received-record-number-of-whistleblower-tips-in-fy-2023/"
Gensler went on to note the crypto industry is one in particular need of oversight as it is “rife with fraud, scams, bankruptcies, and money laundering.”
“While many entities in this space claim they operate beyond the reach of regulations issued before Satoshi Nakamoto’s famous white paper, they also are quick to seek the protections of the law, in bankruptcy court and litigating their private disputes.”
Another area Gensler made special note to highlight was recordkeeping as it pertains to market integrity. According to the address, the SEC has brought actions against 40 firms since December of 2021, yielding more than $1.5 billion worth of penalties.
“We strive to be fair to those who have been wronged, those who we investigate, and the public at large. Process also is about timeliness—working to bring matters to a thoughtful yet expeditious resolution,” he added. “Process is about working with our partners at the federal, state, and international levels, as well as with self-regulatory organizations. I thank all our partners involved in matters from the recent fiscal year.”
