How Recent SEC Deregulation Impacts Compliance

How Recent SEC Deregulation Impacts Compliance

The June 2024 Supreme Court decision SEC v. Jarkesy¹  has led to much speculation relating to SEC enforcement actions.  The Court determined that regulatory fines levied absent a jury trial are unconstitutional.  Although some argue that Jarkesy will hamper the SEC’s ability to seek enforcement actions and civil penalties from entities found in violation of laws and regulations, the reality is that the SEC will not be deterred. In fact, the SEC appears more committed than ever to expand investigations and enforcement actions.  This ever-changing and complex world of regulatory policy and practice demands a vigorous commitment to effective compliance. Orion Compliance provides a viable solution for companies of all sizes to create and automate tools and procedures to ensure they remain compliant now and into the future. 
 

Why Jarkesy Will Not Hinder the SEC

In Jarkesy, the Supreme Court concluded that civil fines handed down from an SEC Administrative Law Judge (ALJ) represents an unconstitutional denial of the right to a jury trial. From this point forward, these civil matters must be adjudicated in a federal court.  

One look at the headlines reveals that many in the media predict that the SEC will be hamstrung by Jarkesy because federal courts are far more expensive than internal ALJ’s. However, a closer examination by legal experts reveals that the impact to SEC enforcement actions will be minimal. Why? Because the SEC has moved away from internal ALJ’s to the federal court system in response to earlier court decisions consistent with Jarkesy.  

“In reality, Jarkesy will have little practical effect on the SEC….The SEC’s Division of Enforcement sharply curtailed its use of the administrative forum for litigated enforcement actions in response to earlier constitutional attacks on the Agency’s use of ALJs. As a result, much of the Commission’s litigated enforcement docket has shifted to federal court already. So, practically speaking, Jarkesy prohibits the SEC from resuming a practice it largely abandoned years ago.” ^{2 3}

The SEC is Committed to Expanding Enforcement

Instead of slowing down, the SEC’s vigorous enforcement efforts are likely to expand.  The SEC has made it very clear that they are moving full speed ahead in 2024 and beyond. In the last 10 years there has been dramatic growth in, and increased complexity of, capital markets. 

“Despite these exponential changes, the Division has remained resilient and endeavored to keep pace with risks in the marketplace. As the speed of this transformation in the markets continues to accelerate, the Division continues to evolve how we conduct examinations and engage with market participants. With over 1,100 staff members spread across eleven regional offices and in Washington, DC, Division staff are engaged with market participants through examinations and proactive outreach continuously.” ⁴

The SEC’s unwavering commitment to conducting examinations should be the only motivation needed for companies to double-down on their commitment to effective compliance policies and procedures.   

Orion Compliance: A Solid Solution in a Sea of Choices

Orion Compliance, available as a standalone solution or as an addition to an existing tech stack, provides an automated, efficient, and proven solution for companies of any size to remain consistent and compliant. From one centralized dashboard, Orion Compliance equips your company with the tools required to efficiently manage employee, firm, and client oversight.  

When regulators are at your doorstep, instantaneous access to comprehensive compliance material is critical to surviving regulatory examinations and investigations. Orion Compliance is designed to help your company remain exam-ready in one integrated system.  Moreover, the ability to access Orion Compliance from a single sign-on form reduces the probability of compliance violations. Simply put, Orion Compliance provides a seamless cloud-based platform enabling you and your team to maintain compliance from literally anywhere.  

Despite the recent Jarkesy decision the SEC promises to remain vigilant. Join the many others that have identified Orion Compliance as the best available solution to remain compliant in an ever-changing and complex regulatory environment.