SEC Commissioner Peirce Flags Agency for "Management Through Enforcement"

Sheep in the Steep: Remarks by SEC Commissioner Hester Peirce before the Northwestern Securities Regulation Institute

A fifth way to shepherd public companies back to their more suitable flatland habitat would be for the SEC to refrain from using enforcement actions to override managerial decision-making. These actions may seem benign and unassailable at first glance—tighter corporate controls are good, right? But, if replicated, they will become a subtle mechanism for the Commission to insinuate itself into corporate management. Some might well argue that this has already occurred. For example, the Commission has taken an aggressively broad interpretation of Exchange Act Section 13(b)(2)(B)’s internal accounting controls provision. As Acting Chairman Uyeda and I noted in a dissent to one case, “The Commission’s attempts to convert an internal accounting controls provision into an ever-unfolding utility tool that magically converts every corporate activity into something the Commission regulates are inappropriate extensions of the agency’s authority.” In another recent example of management through enforcement, the Commission used Rule 13a-15(a), which requires companies to have “disclosure controls and procedures,” to punish a company for “lacking controls and procedures . . . to collect or analyze employee complaints of workplace misconduct” given that it disclosed a risk factor “related to its workforce and how its ability to attract, retain, and motivate skilled personnel might materially impact its business.” […]

An Uncertain SEC Beats Kraken’s Major Questions Doctrine Defense

A federal district court in California allowed Kraken to proceed with its fair notice and due process defenses against a Securities and Exchange Commission lawsuit, but ruled that the major questions doctrine does not apply because cryptocurrencies have not yet risen to a level “to impose massive influence over the American economy,” as the U.S. Supreme Court contemplated. In doing so, U.S. District Judge William H. Orrick of the Northern District of California noted that the SEC’s theory behind this case and similar enforcement actions is that “well-established securities laws apply with equal force to Kraken as a crypto platform because Kraken’s activities bring it within the ambit of the SEC’s authority as Congress envisioned it.” “Whether the SEC is correct is a question that will be resolved through litigation; for now, its theory of liability keeps this case outside the coverage of the major questions doctrine,” Orrick ruled. “As I noted at oral argument, Kraken is welcome to reassert its major questions defense down the road. It is possible that the circumstances and context in which cryptocurrency operates will change during the pendency of this lawsuit.”

Coinbase SEC Appeal Backed by Senate Digital Assets Panel Chair

Coinbase Inc.‘s fight against SEC claims that it operated an unregistered securities exchange should go to the Second Circuit, Sen. Cynthia Lummis, who leads a new congressional digital assets subcommittee, said in a court brief. The US Court of Appeals for the Second Circuit can provide much-needed guidance for the cryptocurrency industry and the agency, Lummis (R-Wyo.) said. It’s “vital that the Second Circuit—the country’s leading securities law court—weigh in now and halt the SEC’s contravention of the separation of powers and encroachment on Congress’s lawmaking powers,” she said in her Jan. 24 brief….

Yolanda Holtzee (1956-2025)

I learned today of the passing of yolanda holtzee. When it comes to the vigorous enforcement of the federal securities laws, there almost certainly will never be another like her. She was the embodiment of persistence and knew the micro-cap market like no one else ever had. When you worked at the SEC, her calls, and emails, and the deluge of TCRs could feel overwhelming. But underneath it all was an amazing heart that was always in the right place and someone who truly cared about fair markets. We should all stop to and pay respect to the greatest U.S. Attorney the Canadian province of British Columbia will ever see, and may her memory always be a blessing to all who knew her.