Emily Gordy explained to Law360 the rationale behind their recent advice to
financial firms. Gordy stated that the
coronavirus pandemic has created “a perfect storm” for scams and abuses aimed at the financial
industry and investors.
The March 20, 2020 story
detailed how Securities and Exchange Commission (SEC), Financial Industry
Regulatory Authority (FINRA), and Financial Crimes Enforcement Network
(FinCEN) regulators are advising financial firms to be on guard against
potential misconduct such as Ponzi schemes, insider trading, pump-and-dump
schemes and imposters.
“What we have here is a perfect storm that basically takes the usual
government warnings about potential scams and puts them on steroids,” said
Gordy, a former deputy of enforcement at FINRA and member of McGuireWoods’
COVID-19 Response team.
“The opportunity for fraudsters and scammers is unprecedented, and the
important thing right now is for the industry and the government to
continue putting information out there,” Gordy added.
Gordy explained that regulators monitoring broker-dealers are more
concerned with systemic, recurring issues than pursuing isolated technical
lapses or “gotcha” moments. More than a dozen enforcement cases brought by
FINRA and the SEC last year involved broker-dealers that simply “looked the
other way” when stock scams were executed on their systems, she noted.
“Broker-dealers are one of the important gatekeepers to the market,” Gordy
said, “and it’s incumbent upon them to conduct trading surveillance, to
appropriately staff their surveillance and review team and to follow up on
red flags to protect customers, markets and their firms as well.”