SEF D.C. -- Keynote Remarks and Q&A Discussion with SEC Acting Director of Enforcement Sanjay Wadhwa

This is a transcript of Sanjay Wadhwa’s keynote address and Stephanie Avakian’s discussion with Wadhwa at the excellent post-election Securities Enforcement Forum in Washington, D.C.:

00:00 - 00:36

Bruce Carton: I am very pleased to introduce now our keynote speaker today, Sanjay Wadhwa. Sanjay is the acting director of the SEC's Division of Enforcement, and he previously served as the deputy director as well as senior associate director for enforcement in the New York regional office. Sanjay joined the SEC in 2003 as a staff attorney and rose to become the co-head of enforcement in the New York office, overseeing the day-to-day functions of its enforcement program. He previously served in other roles, including Deputy Chief of the Market Abuse Unit and Assistant Director of the New York Office. Sanjay has

00:36 - 00:50

Bruce Carton: been very kind to join us in D.C. Today. He has had some remarks, and that will be followed by a Q&A discussion as well. So Sanjay, We're really grateful that you're able to join us today in DC. Please join me in welcoming Sanjay Wadhwa.

01:01 - 01:45

Sanjay Wadhwa: Good afternoon. Please keep eating. Well, first of all, thank you to Bruce for the invitation to speak today and for the introduction. I very much appreciate the opportunity to be able to talk to all of you about the work of the Division of Enforcement at the SEC. But before I get into it, a customary disclaimer, my remarks today are in my official capacity as acting director of the Division of Enforcement, and they do not necessarily reflect the views of the Commission, the individual Commissioners, or other members of the staff. Bruce already went through my bio, so

01:45 - 02:25

Sanjay Wadhwa: I won't go down that road, other than simply to note that in my role as Deputy Director and in this current role, as well as all prior roles that I've held at the SEC, it's been a real privilege to have worked alongside some of the finest public servants, some of the finest public servants there are in the government. And for me to have been able to help advance the Division's investor protection mission while working alongside these folks has just been tremendous. I'd like to take the opportunity today to discuss some of our work over the past

02:25 - 03:09

Sanjay Wadhwa: fiscal year, which ended September 30th. We won't be releasing enforcement's numbers until later this month, so I can't discuss those today, but I think you'll see that the numbers, when they are published, will reflect another productive year for the division. Numbers though only tell one part of the story. They don't quite capture the full impact of the enforcement actions filed or the remedies obtained in terms of investor protection and in terms of changing market behavior. So when you do look at those numbers, please keep in mind that behind those numbers lie enforcement actions that reflect the

03:09 - 03:57

Sanjay Wadhwa: very hard work of the enforcement staff, all designed to try and change market behavior. So today I'd like to discuss the impact that some of our actions have had throughout the industry focusing on three areas where we were very active during this past fiscal year. 1, our proactive off-channel communications initiative. 2, our whistleblower protection cases. And 3, cases in which the Commission recognized and credited parties' cooperation with the Division's investigations. Let me begin with the record-keeping initiative. Perhaps no recent enforcement initiative has garnered more attention than our ongoing off-channel communications initiative, colloquially known as the WhatsApp

03:57 - 04:50

Sanjay Wadhwa: initiative, although I've heard worse, to ensure that regulated entities, including broker-dealers and investment advisors and credit rating agencies all comply with the record-keeping requirements of the federal securities laws. Compliance with those requirements is essential to investor protection and to well-functioning markets. Conversely, non-compliance thwarts effective oversight of the industry, harming investors. So in fiscal year 2024, the Commission brought record-keeping cases resulting in over $600 million in civil penalties against more than 70 firms, including the Commission's first cases charging record-keeping violations against municipal advisers. Now Since December 2021, this initiative has resulted in charges against more than 100

04:50 - 05:30

Sanjay Wadhwa: firms and has resulted in over $2 billion in penalties assessed. And the firms all admitted that their conduct had violated the recordkeeping requirements. A lot has been said about how those penalties are determined. In April of this year at another event, I discussed some of the factors that we consider when assessing what penalties to recommend. We consider the size of the firm, especially the regulated parts of its business, to ensure that the penalty is adequate to serve as a deterrent against future violations. We look at the scope and the scale of the violations. For example, how

05:30 - 06:17

Sanjay Wadhwa: many off-channel communications were there, at what level within the firm, and how many individuals were involved. We consider precedent. The SEC has now issued dozens of settled orders in these matters since December of 2021. These precedents are part of an individualized determination, but they're not a substitute for it. We also consider a firm's efforts to comply with its record-keeping obligations and to prevent off-channel communications, focusing, for example, on timely adoption of meaningful technological or other solutions. Finally, and I really want you to focus in on this, we also consider whether a firm self-policed, self-reported, remediated or

06:17 - 06:55

Sanjay Wadhwa: took other steps to meaningfully cooperate with the staff's investigation. As I noted, the robust penalties that we have obtained thus far in this initiative have gotten a lot of attention. But I think the better takeaway from the scale of this initiative, both in terms of the dollar amount of penalties assessed and in the sheer number of firms charged, is that it has shown a light on how widespread non-compliance was when it came to this practice. And given how far back in time this practice went, it was not the result of folks working remotely during the pandemic.

06:56 - 07:39

Sanjay Wadhwa: And I think the best measure of the success of this initiative is how it has changed industry behavior and spurred proactive compliance by market participants. We're seeing that in the number of firms that are improving their policies and procedures and implementing remedial measures. We're seeing it in the number of firms that are self-reporting these violations. And recognizing those proactive efforts, the Commission has recently resolved charges against several firms with reduced penalties or even no penalties at all. So thanks to those improved efforts at compliance, countless investors will be protected from strengthened oversight of registered entities. The

07:39 - 08:26

Sanjay Wadhwa: initiative is serving its purpose. Another area where we know our message is being heard is when it comes to ensuring that market participants do not impede would-be whistleblowers from contacting the SEC, because that is a violation of the Dodd-Frank Whistleblower Protection Rule. Our whistleblower program plays a critical role in our ability to effectively detect wrongdoing, protect investors in the marketplace, and hold violators accountable. But that program only works if whistleblowers have unfettered ability to share with us information about possible securities law violations. However, all too often we have seen confidentiality agreements, employment agreements, and other such

08:26 - 09:10

Sanjay Wadhwa: agreements by various advisory firms and public companies that impede that ability, including by limiting customers' ability to voluntarily contact the SEC or by requiring employees to waive the right to a monetary award for participating in a government investigation. So this past fiscal year and the year prior, the Commission brought a series of enforcement actions to address widespread violations in this space. Now there was a similar series of actions addressing this issue some years back. And I think for a while there was better compliance, but then things slipped. And so we're back here. This time around though,

09:10 - 09:53

Sanjay Wadhwa: the Commission authorized what I view to be fittingly robust remedies, including the largest penalty on record for a stand-alone violation of the whistleblower protection rule. It is my hope that these enforcement actions will have a significant deterrent effort and will lead to greater and sustained proactive compliance. The outlook is promising, simply judging by the many client alerts about this topic and the frequency with which this topic is discussed, including at conferences like this. Let me move on to cooperation, because I think that's top of mind for a number of you. A few minutes ago, I mentioned

09:53 - 10:36

Sanjay Wadhwa: that a number of firms are self-reporting violations in the off-channel communications initiative. But those are not the only cases where we've seen market participants self-report and otherwise cooperate with our investigations. We have been talking very deliberately about the benefits of cooperation for several years now. At the West Coast iteration of this event, about six months ago, former director Gurbir Grewal discussed at length what parties can do to best position themselves when advocating for cooperation credit from the SEC. I would encourage all of you to review that speech if you haven't done so, if you haven't seen

10:36 - 11:23

Sanjay Wadhwa: it. The speech distilled the message we have been very clearly conveying for some time. Work with us and we'll work with you. In fiscal ’24 we saw those efforts bear fruit with market participants really stepping up their self-policing, their self-reporting, remediation, and other forms of cooperation. We saw this throughout the securities industry, in cases involving public companies, investment advisors, broker dealers, and individuals, and in matters involving a range of violations such as material misstatements, fraud, record-keeping violations, and control failures related to cybersecurity. And I'm very pleased to note that that has continued in the new fiscal

11:23 - 12:07

Sanjay Wadhwa: year. Just last week, the Commission resolved several actions with JPMorgan and acknowledged that firms self-reports remedial measures and voluntary payments of over $100 million to harmed customers. Listen, it benefits everyone when market participants step up like this. It benefits the firms who will likely ultimately resolve an SEC investigation more quickly and likely with reduced sanctions. It benefits the division to resolve more quickly, to resolve cases more quickly and more efficiently so that we can focus our resources elsewhere. But most importantly it benefits investors who are no longer at risk from the conduct at issue and who

12:07 - 12:49

Sanjay Wadhwa: are protected by improved proactive compliance moving forward. So it has been encouraging to see market participants respond to our emphasis on cooperation over the last several years. I'll make one final point on this topic. There's been a bit of a common refrain from the defense bar. Some of you belong to it. Likely, including at this conference, that folks don't know what to do in order to get cooperation credit or what the benefit is of cooperating with the staff's investigation. I reject that. Now I recognize that we don't have a formal policy that guarantees certain outcomes based

12:49 - 13:27

Sanjay Wadhwa: on certain conduct, but based on what we're seeing in the Division of Enforcement, our message is clearly being heard and market participants and their counsel, at least those who are paying attention, are responding in kind. And that, of course, is a major purpose behind our enforcement actions and our remedies. To be sure, an important part of it is to hold bad actors accountable, but a crucial purpose is to deter future violations and promote compliance throughout the industry. And I believe our enforcement actions are doing just that. Our record-keeping initiative, our whistleblower protection cases, cases where we

13:27 - 14:30

Sanjay Wadhwa: message the benefits of cooperation, Those are just some examples of where we are seeing this. But every enforcement action that the Commission brings sends ripples, some bigger than others, of deterrence and compliance throughout the industry. So while I know that those top line numbers, when they are published, will get a lot of attention, I will be thinking about the individual and cumulative impact of those enforcement actions across the securities industry and what it all means for investors. And with that I'm happy to discuss some additional topics in a more informal fireside chat. Thank you. I'm sure

14:30 - 14:31

Sanjay Wadhwa: you have not done.

14:31 - 14:50

Bruce Carton: Sanjay has very kindly agreed to also participate in a Q&A discussion today, which will be moderated by Stephanie Avakian. Stephanie is a partner at Wilmer Hale in Washington, D.C., and of course Stephanie herself was director of the SEC Division of Enforcement from 2016 to 2020. Thank you so much Stephanie. Let me turn it over to you.

14:50 - 15:33

Stephanie Avakian: Thanks Bruce. Well thanks Sanjay for the remarks. It's always great to hear from you, from the Division, on what's on your minds and appreciate the opportunity. There's other stuff on my mind too. Oh I'll bet that. What else could be on your mind? I mean, well why don't we go there? So, so look it's, I mean you knew when you took the job as acting director, you were going to have to lead the division through a transition, right? That we knew. But it's harder when it's a political transition as well. It gets more complicated. I've been

15:33 - 15:50

Stephanie Avakian: there. And look, the staff, there's a lot of uncertainty and nobody likes change and the staff doesn't like change. How do you think about, like how are you, it's probably an unfair question today, but how do you think about leading through this time?

15:51 - 16:31

Sanjay Wadhwa: Yeah, now that's a good question. It's very timely. In fact, it's too timely. We're still all processing the news and trying to figure out how it's going to affect our day to day, but at a very basic level, the Commission's three-part mission, the division's mission of investor protection, none of that changes, none of that changes, right? I mean, We don't take a holiday from protecting investors. We don't take a break. We don't kind of put pencils down and say, well, let's just wait for the new folks on the 10th floor. The 10th floor is where the

16:31 - 17:32

Sanjay Wadhwa: chair's office is, for new folks on the 10th floor to tell us what to do. There are ongoing investigations, well over 1,500 of them, and those will continue. We are in different stages of different matters and we will continue to push forward. And I think the goal is to continue to come in and do the job that we're being paid to do, which is promote the integrity of the marketplace and to protect investors from harm and from unscrupulous actors in the marketplace who prey on them. That is, if we just keep our heads down and keep moving forward, I think we will have done what the American public expects of us. And the rest of it, whatever is beyond our control, is simply just that. It's beyond our control.

17:32 - 17:51

Stephanie Avakian: Yep. Like I said, I've been there and that's exactly what I told people back in 2016, I guess, which is a long time ago now and on the way out the door in 2020. And that's the most you can do. And most of the staff is incredibly long tenured and have been through many many transitions and have seen this.

17:51 - 18:27

Sanjay Wadhwa: That's absolutely true. It's the enforcement staff, the agency writ large is very fortunate to have long tenured public servants who do this because they have a passion for it. They believe in the mission of the Commission. They believe in the mission of the Division of Enforcement. So again, folks are going to take a day or two, perhaps to internalize the news and then it's back to business and the hope is that we do so without missing a beat.

18:28 - 19:00

Stephanie Avakian: Well speaking of back to business, When you took the deputy position, or maybe not terribly long after, you gave a speech pretty early in your tenure. And one of the things you talked about was sort of what I'll put in the process bucket, kind of process changes or process thinking. You talked about, you know, you and Gurbir were maybe not going to take as many Wells meetings as folks might like, that maybe you were going to limit it to more novel issues, you talked about empowering the staff, but the changes that I put in the process

19:00 - 19:19

Stephanie Avakian: bucket. And so now, a few years later, looking back, any reflections on sort of, you know, at the time the defense bar was kind of up in arms, oh, they're not going to take Wells' meetings, and so there was a lot of worry and hand-wringing about it. Reflecting on it, did it come to pass? Did things change?

19:20 - 20:18

Sanjay Wadhwa: You know, I don't recall any of this. That's a refrain we hear often during testimony. Listen, I mean, I know that it landed like a lead balloon with the defense bar when Gurbir said that. But really, it wasn't meant to short circuit or to somehow cut off the process that we afford counsel and parties before we take action, right? So in the context of Wells notices and white papers, I think the desire was to make things streamlined, to empower the staff to make those decisions and to let us know if these Wells meetings would be granted

20:18 - 20:58

Sanjay Wadhwa: at the local SO level or whether this was something that was implicating programmatic interests or there were genuine issues of law or material fact and so the front office needed to be involved. As it has turned out, I don't think that we're hearing those complaints from the defense bar because we have been granting lots of, we did grant over the last three plus years, a fair number of Wells meetings. But it is a process that eats up time. It is a process that requires a fair amount of effort on the part of the staff. And so

20:58 - 21:43

Sanjay Wadhwa: when I made those remarks, I was also including in that bucket white papers and you may remember this there was a point in time when white paper submissions had become almost a prerequisite to making a Wells submission and we were trying to sort of short circuit that to make things more streamlined to allow the staff to move forward more swiftly. Just in the four weeks or so that I've been acting director, I have attended seven or eight Wells meetings. So again, putting aside the clamoring from the defense, I don't think in practice it worked out the

21:43 - 21:45

Sanjay Wadhwa: way people had feared it would.

21:45 - 21:58

Stephanie Avakian: Yeah, yeah. I think that's fair from where I sit as well. Do you think it, whatever changes you made around the edges or not around the edges, do you think it short-circ, shortened the process at all? Or did you see a cause and effect there?

21:59 - 22:35

Sanjay Wadhwa: I think so. I hope so. You know, I mean, listen, I mean, the longer the process, it tends to favor you, right? I mean, delay is your best friend. It doesn't help us on this side of the table. So from our perspective there's process and then there's too much process. At some point you have to make decisions, at some point you have to move forward. And I think we've managed to walk that line and we're walking it better now that Gurbir is not there.

22:38 - 22:47

Stephanie Avakian: Is there anything else you'd put in the process bucket? You know in terms of the whole empowering the staff, anything else that kind of comes to mind that you all have done to empower the staff?

22:49 - 23:32

Sanjay Wadhwa: Well, we have tons of meetings where, internal meetings where we may ask hard questions from the front office, but ultimately it's the staff is closest to the facts. They are, so the amount of deference that we give to the staff, I think, has ticked up. I just want to make one more point on the Wells, which is that I think implicit in the sort of clamoring, as I put it, on the defense side was this notion that somehow if you don't get an audience with the front office, that the front office is not involved in the

23:32 - 24:07

Sanjay Wadhwa: matter, that could not be farther from the truth. Even in cases where you're meeting with the local SOs, regional office SOs, home office SOs, they are fully engaged with us. Or I should say, we are fully engaged with them. Yeah. And charging decisions and you know the scope of the charges, the universe of defendants, all of that is the product of lots of internal meetings and questions and answers. So you are getting some of that, you are getting that process in the sense that we are involved.

24:08 - 24:22

Stephanie Avakian: Yeah, yeah. That's a, it's good to know. I guess I have a couple of reactions to that. One is, it's good to know, because people say that they talk to the front office but I'm not sure we always believe that that's actually true so that's actually good to know.

24:22 - 24:23

Sanjay Wadhwa: Give me names.

24:23 - 24:45

Stephanie Avakian: Yeah we'll talk about that later but but but also look there is a feeling sometimes that the staff is not going to carry the message back the same way that someone might have presented it. But I think what I hear you saying is there are lots of meetings and lots of opportunities for that. But also you're very involved in the process. There

24:46 - 25:14

Sanjay Wadhwa: are lots of meetings, lots of opportunities where we press the teams and I think one thing that the public doesn't see is the cases we don't bring where following a Wells meeting even at the local so level the decision is made either to curtail the charges to cut back on the on the universe of defendants or do not bring a case at all so the process does work it works I think it

25:14 - 25:46

Stephanie Avakian: works yeah sort of a great segue to kind of follow up on what you said about cooperation. And you know I used to sort of I've said the same thing right which is we feel like we're giving some sense to the market on what you get for cooperation right and I think Gurbir talked a lot about cooperation you've talked a lot about cooperation I think in the last few years we've seen a bunch of cases with no penalties and other ways that that cooperation was given and you all have given lots of speeches pointing to those

25:46 - 25:53

Stephanie Avakian: things. And so, and I think all that's great from a market perspective, from a defense bar perspective.

25:55 - 25:56

Sanjay Wadhwa: I hear a but coming.

25:56 - 26:27

Stephanie Avakian: There's a but, there's a but. So, I mean, there's a bunch of buts, but the one I'll follow up on in the first instance is the holy grail for companies, let me back up, whether to self-report is a very difficult decision, sometimes. Sometimes it's not, sometimes it's so obvious you've got a problem and you're going to stop, but sometimes it's a hard decision for a bunch of reasons. Maybe it's gray area, maybe the facts are, you could look at them one way, we could look at them another way. The holy grail in considering whether to self-report

26:28 - 26:50

Stephanie Avakian: is is there a chance, is there a snowball's chance in hell? Maybe there could not be a case at the end of this. Maybe because we self-reported, because we cooperate, because we were completely transparent, it could maybe not turn into a case. Is that in the range, I mean Seaboard talks about that as one of the things that's in the range of potential outcomes how do you think about that question

26:51 - 27:01

Sanjay Wadhwa: nothing that's a fair question and again I would say to you that I think the shortcoming here is that we don't publicly announced our declinations

27:01 - 27:02

Stephanie Avakian: it's not transparent that's

27:02 - 27:41

Sanjay Wadhwa: not transparent there's a There's a lack of transparency because unlike perhaps another government agency, we don't actually say here's the contact that'll, if you do this, then this is what you get. But certainly in negotiations, and there are any number of you, you know, I see a lot of familiar faces here, who when you're sitting across the table and you tell us that my client's self-reported, I can't think of a stronger sort of footing to launch those settlement negotiations from. When you self-report to us and it's a matter where otherwise the odds of us having kind

27:41 - 28:27

Sanjay Wadhwa: of learned of the conduct are somewhat minimal or low, the staff always takes that into account. We take it into account in the front office. And the holy grail of like not bringing a case, yes, it's available, but there are so many other factors that kind of go into the bucket. It can be sort of the scope of the violation, the duration of the violation. It can be sort of many other things. It can be what sort of policies and procedures did you have, what sort of compliance environment did you have, what were the reasons for

28:27 - 29:14

Sanjay Wadhwa: this. Yes, you've come in and self-reported and to your point there are any number of recent actions where we've recommended and the Commission has authorized a no penalty settlement, right, including one with JPM just last week. And that's a good example. So JP Morgan is a prominent Wall Street institution. They've had regulatory issues before. They heard us urging folks on the street to come talk to us, to work with us, to work alongside us, and they came in and in one fell swoop we resolved five investigations. Now they just happened to be five investigations that were

29:14 - 29:45

Sanjay Wadhwa: somewhat similarly situated in the process, but that was, I mean, one of those investigations resulted in a no penalty settlement so yeah which you highlighted which we highlighted so yes I mean the Holy Grail is out there and given the right set of facts, I think we'll be able to sort of actually not bring an action. The question is how do you publicize it?

29:45 - 29:47

Stephanie Avakian: That is the question. We struggled with that.

29:47 - 29:54

Sanjay Wadhwa: The public declination and it's on the table. That's all I will say for now it's on the table

29:55 - 30:22

Stephanie Avakian: I'm yeah it's a challenge we I mean that's been a time of process for exactly and it's long been a challenge how do you message what you really get for cooperation off-channel communications so your predecessor just told the wall street journal you're done with off-channel he he after he left not while he was there, after he left.

30:23 - 30:25

Sanjay Wadhwa: That's key though, right? That's key.

30:26 - 30:49

Stephanie Avakian: But he would know, right? He would know if you were done. And that's what he basically said, like look for, you know, so we're pretty much wrapping it up and, you know, anything else will be FINRA, exams, and like no money. So we're all glad to hear that. That seems, that's true. What do you, what should we expect to see on the off-channel front?

30:49 - 31:34

Sanjay Wadhwa: Listen, I mean, you can juxtapose his remarks with the fact that because we've been messaging cooperation and self-reporting that self-reports are continuing to come in. And we don't prejudge investigations when we start them, right, I mean it's, so you can have, off-channel communications can sort of be part of the initiative or it can be part of an entirely different investigation in which we kind of like get documents from a third party and there's no production from the firm that's engaged in the off-channel communications, the registrant. So you will continue to see cases involving record-keeping violations. In

31:34 - 31:55

Sanjay Wadhwa: terms of the initiative, the self-reports come in. We're going to be making individualized determinations whether that's something that we're going to bring or whether that's something that we can now lean on our self-regulatory partners to kind of carry the water forward.

31:55 - 31:55

Stephanie Avakian: Yeah

31:56 - 32:10

Sanjay Wadhwa: but you know we work collaboratively with FINRA. We obviously work in close coordination with exams. So I'd say he's half right.

32:14 - 32:55

Stephanie Avakian: You know, there have been other areas where you all have been, I don't know if aggressive is the right word, but maybe it is. But when you think about sort of kind of taking the law to the next, you know, kind of the next level accounting controls, internal accounting controls. That's a space where you guys have been creative. You know, first in the, I think we saw a little bit in the 10b-5(1) space, you know, with the recent charter case, but then I'd say more recently with the cyber stuff cyber disclosure stuff with SolarWinds with R.R.

32:55 - 33:33

Stephanie Avakian: Donnelly and then look obviously and I know you can't talk about this but you know SolarWinds the judge dismissed the internal accounting controls piece of the case, which I think folks in the defense bar kind of had hoped to see, given I think folks generally kind of viewed that as a stretch on the legal theory. But you guys had the Aradonelli settlement and then you brought more recently the four, I'll call them the SolarWinds follow-on cases for lack of a better thing to call them and they did not have the internal controls charges. Can you shed

33:33 - 33:36

Stephanie Avakian: any light on how you're thinking about that I'm

33:37 - 33:53

Sanjay Wadhwa: yeah so SolarWinds I'm not going to talk about this litigation but I will note that internal accounting controls in section 13(b)(2)(B) I think yes is what it is section 13(b)(2)(B) Joe says yes.

33:53 - 33:53

Stephanie Avakian: Joe Brenner.

33:53 - 33:56

Sanjay Wadhwa: Yeah, Joe gave us a thumbs up. Okay.

33:56 - 34:47

Sanjay Wadhwa: You know, that's been an important tool in our kit for some amount of time now, right? And again, I can't speak to SolarWinds as much as I'd like to, but the fact is that 13(b)(2)(B) or internal accounting controls is a charge that is available to us as our charges pertaining to disclosure controls and policies. And as you know, of all people, you know all too well, we don't file our enforcement actions lightly. There's a pretty disciplined process that we go through, and you have to have buy-in from our sister divisions and offices, and in SolarWinds,

34:48 - 34:54

Sanjay Wadhwa: sorry, I'm not gonna go there. But we've had a long history of bringing charges in this space.

34:54 - 34:55

Stephanie Avakian: Yes.

34:57 - 35:39

Sanjay Wadhwa: And I think we'll continue to when the facts present. The way we look at it is that access to the US capital markets is not some sort of a right, it's a privilege. And if you're going to be engaging in capital formation if you're going to be like sort of within the sort of the what should I say the concept of Section 13 at large then I think 13(b)(2)(A) and 13(b)(2)(B) are important provisions for us to be able to enforce violations of.

35:40 - 35:52

Stephanie Avakian: Yep. Yep. And it's long been its own little lightning rod in the Commission. You know, some Commissioners agree, some Commissioners don't agree, I assume we'll continue to see it play out that way at the Commission level.

35:53 - 35:54

Sanjay Wadhwa: I think that's right.

35:55 - 36:25

Stephanie Avakian: So I'll just follow up, we only have a couple minutes left on the disclosure controls. Also an interesting charge, until the last few years, really not a lot of stand-alone disclosure controls charges. I think we did it maybe once or twice, and there have been a handful in the last few years. The recent SolarWinds cases, the cyber disclosure cases, if you will, and not those necessarily specifically, but you've brought a handful that

36:25 - 36:25

Sanjay Wadhwa: I

36:25 - 37:02

Stephanie Avakian: would put in that bucket, all of which I think are conduct that predate the cyber disclosure rule 105 that came in earlier this year. How do you think about those cases? I mean, those are cases where the companies are, they're victims, right? They're victims of very bad things, right? Criminal conduct often by state actors or other threat actors. Does that, you know, when you think about these subsequent, you know, disclosure cases, either whether it was inadequate disclosure, misleading disclosure, whatever, how does that factor in, if at all, right, the idea that they're victims.

37:02 - 37:55

Sanjay Wadhwa: Yeah, we do. We do take into account the fact that the issuer has been, you know, their cybersecurity defenses have been breached. But to the extent the subsequent disclosures are lacking in candor, are somehow materially misleading or tend to omit certain information that renders them materially misleading, I think what we are trying to do is prevent investors from being victimized because investors are making these decisions to invest in a particular issuer and unless they have all of the information that the regulatory framework requires an issuer to put out there. They're making decisions on less than full

37:55 - 38:29

Sanjay Wadhwa: information. And that to us is not okay. At least, again, speaking for myself, to me, you know, when you have a cybersecurity incident, you can conduct your investigation, you can put out information, And again, the frustration here, at least from my perspective, is you don't see the cases we don't bring. You don't see the cases we don't bring. And there are far more so than the cases we do bring in this space.

38:29 - 38:34

Stephanie Avakian: That's fair. We can look at the news and see that there are lots of breach cases, right? And we don't see SEC cases at all.

38:34 - 38:57

Sanjay Wadhwa: And you don't see a corresponding SEC enforcement action in each one of those cases. So it's only where we think the facts and circumstances are such that really it just crosses a line. And we're not talking about a footfall. It's in my view, again, it's something well beyond that. In those cases, we think an enforcement action is appropriate.

38:58 - 39:26

Stephanie Avakian: Yeah, they're tricky issues having now, you know, post the Rule 105 stuff going into play. They're very tricky issues that companies grapple with. You may not be able to answer this and you may not even know. Are you guys looking at whether a company's got 105 right? Like whether, you may not be able to answer. You're right. OK. I'm just curious because they're really hard issues. And it's only been in place now what, 10 months or whatever.

39:28 - 39:56

Sanjay Wadhwa: Listen, I'm not going to answer that question, but I will assure all of you that wherever we go with newly enacted rules, we've got an army of experts at the agency helping the enforcement division. So whatever your views are on sort of the legal skills of an average enforcement attorney, you can rest assured that we're consulting with people who actually know this stuff, like the back of their hands.

39:56 - 39:57

Stephanie Avakian: We've seen it with

39:57 - 40:04

Sanjay Wadhwa: Reg BI. And we've seen it. Yeah, you've seen it in other areas. So I think that's where I would stop.

40:04 - 40:11

Stephanie Avakian: Yeah, that's helpful. And with that, we'll wrap it up. I mean, we're out of time. And you were very generous with your time. So thank you.

40:11 - 40:14

Sanjay Wadhwa: Thank you for having me. Thank you. Thank you.