SEC Creates New Tech-Focused Enforcement Team

Sheppard Mullin Richter & Hampton LLP

On February 20, the SEC announced the creation of its Cyber and Emerging Technologies Unit (CETU) to address misconduct involving new technologies and strengthen protections for retail investors. The CETU replaces the SEC’s former Crypto Assets and Cyber Unit and will be led by SEC enforcement veteran Laura D’Allaird.

According to the SEC, the CETU will focus on rooting out fraud that leverages emerging technologies, including artificial intelligence and blockchain, and will coordinate closely with the Crypto Task Force established earlier this year (previously discussed here). The unit is comprised of approximately 30 attorneys and specialists across multiple SEC offices and will target conduct that misuses technological innovation to harm investors and undermine market confidence.

The CETU will prioritize enforcement in the following areas:

  • Fraud involving the use of artificial intelligence or machine learning;
  • Use of social media, the dark web, or deceptive websites to commit fraud;
  • Hacking to access material nonpublic information for unlawful trading;
  • Takeovers of retail investor brokerage accounts;
  • Fraud involving blockchain technology and crypto assets;
  • Regulated entities’ noncompliance with cybersecurity rules and regulations; and
  • Misleading disclosures by public companies related to cybersecurity risks.

In announcing the CETU, Acting Chairman Mark Uyeda emphasized that the unit is designed to align investor protection with market innovation. The move signals a recalibration of the SEC’s enforcement strategy in the cyber and fintech space, with a stronger focus on misconduct that directly affects retail investors.

Putting It Into Practice: Formation of the CETU follows Commissioner Peirce’s statement on creating a regulatory environment that fosters innovation and “excludes liars, cheaters, and scammers” (previously discussed here). The CETU is intended to reflect that approach, redirecting enforcement resources toward clearly fraudulent conduct involving emerging technologies like AI and blockchain.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

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