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Opening Remarks at the SEC Staff Roundtable on Regulatory Approaches to Combating Retail Investor Fraud

Sept. 26, 2018

Good morning, everyone. I would like to begin by thanking Brett (Redfearn) and the Division of Trading and Markets for organizing this roundtable on a critical topic — regulatory approaches to combating retail investor fraud.

Serving and protecting Main Street investors has been and will remain my top priority as SEC Chairman. Our agency has historically worked very hard to identify, punish and deter misconduct that affects retail investors. But the relative propensity for retail fraud — including in the penny stock and digital asset markets — continues to trouble me and my colleagues.

Today’s roundtable is part of a broader effort across the SEC to examine whether there are additional steps that we can take to protect Main Street investors. Last September, for instance, the Division of Enforcement formed the Retail Strategy Task Force, which draws on expertise from across the agency to develop strategies and techniques for addressing the types of activities that harm retail investors.[1] These include microcap “pump and dump” frauds, Ponzi schemes, and the sale of unsuitable products, among other things. Additionally, in May, we launched the “SEC Action Lookup for Individuals” — or SALI — a new online search feature that enables retail investors to research whether the person trying to sell them investments has a judgment or order entered against them in an enforcement action.[2] SALI is intended to help investors avoid financial fraud. Our agency also participates in a joint agency task force, spearheaded by the Department of Justice, on market integrity and consumer fraud.[3]

In addition to detecting and punishing fraudulent conduct that has already occurred, it is paramount that we also proactively consider preventative measures. Put simply, we need to continually examine whether our regulatory framework is appropriately tailored to help prevent fraudulent activity before it occurs. Today’s roundtable will explore many of the questions in this area that have been on my mind. For example:

  • Are there specific rule changes that the Commission should consider that would better deter fraudulent practices? Are the rules governing the distribution and trading of penny stocks appropriately tailored in this regard?
  • Are there ways that we can help enhance the ability of broker-dealers, investment advisers and other industry participants to identify and combat retail fraud? Are there things that gatekeepers, such as lawyers and accountants, can do to help in this realm?
  • Are there steps that the Commission, our fellow regulators and the financial services industry can take to help investors better protect themselves?

I am extremely passionate about this topic and have been looking forward to this event.

Panelists — thank you for your participation today. I look forward to your perspectives and ideas.


[1] See “SEC Announces Enforcement Initiatives to Combat Cyber-Based Threats and Protect Retail Investors,” SEC Press Release (Sept. 25, 2017), available at https://www.sec.gov/news/press-release/2017-176.

[2] See “SEC Launches Additional Investor Protection Search Tool,” SEC Press Release (May 2, 2018), available at https://www.sec.gov/news/press-release/2018-78.

[3] See Remarks on the Establishment of the Task Force on Market Integrity and Consumer Fraud, SEC Chairman Jay Clayton (July 11, 2018), available at https://www.sec.gov/news/speech/task-force-market-integrity-and-consumer-fraud.

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