SEC on high alert for illegal stock market activity
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The Securities and Exchange Commission is — like many of us — working from home, but still very much working. Why? Among other reasons, COVID-19 has created a fertile moment for insider trading.
We spoke with Haima Marlier, a former senior trial counsel for the SEC, and now a partner at the law firm Morrison & Foerster, to get a better idea of what the SEC is looking out for. The following is an edited transcript of that conversation.
David Brancaccio: Given the shock to the economy and so much in flux because of coronavirus, the big question is how is COVID-19 affecting just about every business? And if someone had some special information, perhaps there may be an impulse for people to do insider trading?
Haima Marlier: Well, it seems that there could always be an impulse for certain bad actors to do insider trading. It’s also important to understand that this environment is very challenging for companies with respect to insider trading for two reasons. First, so many employees are working remotely. Second, given the way that the virus is impacting business operations, many employees — and not just high level directors and officers — have coronavirus-related, material, nonpublic information. So a hypothetical example could be inventory clerks working for a manufacturing company that notice that an essential input to their company’s key product, normally delivered weekly, has in fact not been delivered for weeks.
Brancaccio: And what’s your sense? I mean, the SEC was the first federal agency to tell its employees to work from home. If there’s anyone out there who thinks “OK, they’re not paying attention,” you think that the SEC is indeed paying attention?
Marlier: I think the recent trading suspensions as well as statements from the SEC, there have been a few so far, show that the SEC is very much paying attention. The SEC has already suspended trading in the stock of two companies due to concerns about the accuracy of coronavirus-related information on the internet.
Brancaccio: The concern is maybe companies pumping up their stocks by circulating unsupportable claims, or people acting on the company’s behalf doing so?
Marlier: Sure, it could be that. It appears in the case of one of these trading suspensions that the SEC said that the inaccurate information it was concerned about appeared to come from third-party stock promoters.
COVID-19 Economy FAQs
How many people are flying? Has traveled picked up?
Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.
How are Americans feeling about their finances?
Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.
Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.
What’s going to happen to retailers, especially with the holiday shopping season approaching?
A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.
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