Willkie Releases SEC Enforcement Update

Willkie Farr & Gallagher released a client alert covering the Securities and Exchange Commission (SEC) Division of Enforcement’s actions over the summer months. The alert notes interesting developments in the areas of crypto, activist short selling, and cybersecurity. On cybersecurity, a U.S. District Judge in the Southern District of New York dismissed certain SEC claims in the SolarWinds litigation. The court held that the SEC’s claim that SolarWinds’ cybersecurity deficiencies violated Section 13(b)(2)(B) of the Securities Exchange Act of 1934 was incorrect. Section 13(b)(2)(B) of the Securities Exchange Act of 1934 requires companies to maintain “a system of internal accounting controls sufficient to provide reasonable assurances that … access to assets is permitted only in accordance with management’s general or specific authorization.” According to the client alert, the Court’s rejection of this application of Section 13(b)(2)(B) to cybersecurity may force the Commission to rethink its attempt to expand the scope of the internal accounting control provision.

Click here to view the Willkie SEC Enforcement client alert