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New SEC Enforcement Tools Target Financial Reporting, Microcap Securities Fraud, and Risk Analysis

Client Alert | 1 min read | 07.02.13

On July 2, 2013, the Securities and Exchange Commission (SEC) announced three new initiatives intended to bolster the SEC's ability to recognize fraud in the marketplace. They are:

  • The Financial Reporting and Audit Task Force, which will focus on enforcement related to accounting and disclosure fraud. The task force, staffed by attorneys and accountants from across the country, will increase the SEC's review of financial statements, restatements, and revisions, using quantitative tools like the Accounting Quality Model, and reviewing financial results in the context of industry trends.
  • The Microcap Fraud Task Force, which will focus on fraud in the issuance and trade of the securities of microcap companies, particularly those companies that may not file regular public financial reports. Working alongside the existing Microcap Fraud Working Group, this task force will target the third party agents, such as attorneys, auditors, broker-dealers, and transfer agents, of microcap companies that may play a role in securities fraud.
  • The Center for Risk and Quantitative Analytics (CRQA), which will employ statistical data analysis to identify high-risk behaviors and transactions in the securities marketplace. The CRQA will work closely with other SEC divisions and offices and provide strategic direction to the Enforcement Division. 

These three programs are intended to help the SEC identify fraud proactively and provide additional deterrents to fraudulent activity in the securities markets, and they are in line with the SEC's increased focus on enforcement since Mary Jo White assumed the office of the Chair in April of this year. Whether an increase in investigations will deter fraudulent activity or merely cause an expensive distraction for companies engaged in otherwise legal activity remains to be seen. Crowell & Moring's Corporate Group is able to assist you in identifying and mitigating compliance risk factors prior to an investigation, and in working with the SEC should any investigation be initiated.

For the full text of the SEC's Press Release, please click here.

Insights

Client Alert | 2 min read | 07.15.26

CMMC Phase II Suspension Requires Reconsideration of Such Requirements in Solicitations

As discussed in more detail here, the U.S. Department of War (DoW) recently issued a memorandum (Memo 26-P-1023, dated July 13, 2026) directing the immediate suspension of Cybersecurity Maturity Model Certification (CMMC) Phase II requirements (Level I and II self assessments are still permitted). Significantly, the memo directs that “all pending and future CMMC implementation milestones across DoW solicitations and contracts are held in abeyance until further notice.” Moreover, the DoW issued a memorandum on implementing these requirements (available here), directing agencies to issue amendments removing CMMC Level 2 and 3 requirements from active solicitations “as soon as practicable.” Contractors should monitor the government’s compliance with this requirement and should be prepared, if needed, to file a bid protest to protect their rights....

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