An irreverent Wall Street Blog
After the SEC's PAUSE, We're Left Wondering Why
April 27, 2022Recently, the SEC published a Press Release https://www.sec.gov/news/press-release/2022-68:
SEC Updates List of Firms Using Inaccurate Information to Solicit InvestorsFOR IMMEDIATE RELEASE2022-68Washington D.C., April 25, 2022 --The Securities and Exchange Commission today announced that it updated its list of unregistered entities that use misleading information to solicit primarily non-U.S. investors, adding 58 soliciting entities, 11 impersonators of genuine firms, and one bogus regulator.The SEC's list of soliciting entities that have been the subject of investor complaints, known as the Public Alert: Unregistered Soliciting Entities (PAUSE) list, enables investors to better inform themselves and avoid being a victim of fraud. The latest additions are firms that SEC staff found were providing inaccurate information about their affiliation, location, or registration. Under U.S. securities laws, firms that solicit investors generally are required to register with the SEC and meet minimum financial standards and disclosure, reporting, and recordkeeping requirements."With publication of the PAUSE list, the Commission continues to take action to protect retail investors," said Jose M. Rodriguez, Acting Chief of the SEC's Office of Market Intelligence. "We are issuing an increasing number of alerts to provide valuable information and aid investors in making informed investment decisions."In addition to alerting investors to firms falsely claiming to be registered, the PAUSE list flags those impersonating registered securities firms and bogus "regulators" who falsely claim to be government agencies or affiliates. Inclusion on the PAUSE list does not mean the SEC has found violations of U.S. federal securities laws or made a judgment about the merits of any securities being offered.The PAUSE list is periodically updated by the SEC's Office of Market Intelligence, in coordination with the Office of Investor Education and Advocacy and the Office of International Affairs.How to protect yourself:
- Beware of Communications Falsely Appearing to Come from the SEC - Investor Alert
- Watch Out for Scammers Posing as SEC Employees - Investor Alert
- Investor Alert: When Engaging With the SEC on Social Media, Use Our Verified Accounts and Be Alert for Impersonators
- Investor Alert: SEC Impersonators Pretend to Help Investors Buy Stock
- Visit Investor.gov for tips on investing wisely and avoiding fraud.
First and foremost, let me make sure that you and I are on the same page -- I am NOT criticizing the SEC's publication of its updated PAUSE list. That list has some worth. The updating of the list has some value. Having made it clear that I'm not criticizing the SEC's publication of the updated PAUSE list, let me now go ahead and . . . well . . . criticize the SEC.
The April 25, 2022, PAUSE Press Release asserts that the updates added "58 soliciting entities, 11 impersonators of genuine firms, and one bogus regulator." As to the point of publishing the update:
"With publication of the PAUSE list, the Commission continues to take action to protect retail investors," said Jose M. Rodriguez, Acting Chief of the SEC's Office of Market Intelligence. "We are issuing an increasing number of alerts to provide valuable information and aid investors in making informed investment decisions."
Really? Seriously?? The publication of a list constitutes action taken by the SEC to protect retail investors? Publishing an "increasing number of alerts" provides investors with valuable information? Oh, puhlease . . .
Yes -- there are likely some savvy investors out there who have been contacted by unregistered entities, and a few of those targeted may have known that there was a PAUSE list on the SEC's website. Maybe an investor consulted the list and avoided being duped. To the extent that the PAUSE Press Release achieves that objective, bravo! In reality, however, few (if any) public investors are aware of the PAUSE list or know where to find it. Notwithstanding such uninterest, the SEC continues to issue increasing numbers of alerts that are creating a Tower of Regulatory Babel, and we all know how that ended.
The SEC PAUSE Release is rife with much useless information and oh-so-breathless headlines. According to the first bullet--point at the end of the Release, you should be "Beware." Beware of what? Oh, of false communication appearing to have originated from the SEC. Wow, that's a heavy-duty dose of meaningless advice. Not much investor protection in that nonsense. According to the second bullet-point, you should "Watch Out." Watch out? Watch out for what? Oh, for scammers posing as SEC Employees. Wow, that's a dubious warning. According to the third bullet-point, you should "be alert." Alert? Alert for what? Oh, for impersonators. All of those bullet-points remind me of the pharmaceutical commercial urging you to use a drug but warning you not to take it if you're allergic to it -- and I would know that how?
There is a moral hazard when the SEC publishes "an increasing number of alerts" and asserts that such constitutes regulatory action.
Publication is not action.
Publication is not regulation.
At some point, one wonders -- one should ask -- if the SEC spends too much time issuing alerts and not enough time going after the very fraudsters and scammers about whom the alerts are being issued. For many Wall Street regulatory veterans such as me, it appears that the industry's regulators invest too much time and energy amassing lists of malefactors but don't quite allocate the necessary resources towards eradicating those on said lists.