SEC Arms Task Force to Hunt Global Fraud, Safeguard U.S. Investors

The U.S. Securities and Exchange Commission (SEC) has announced the formation of a dedicated Cross-Border Task Force to combat fraud involving foreign-based companies seeking access to U.S. capital markets. The initiative is a strategic expansion of the Division of Enforcement’s capabilities, with a primary focus on identifying and investigating violations of U.S. federal securities laws related to these companies. This includes targeting market manipulation schemes such as "pump-and-dump" and "ramp-and-dump," as well as scrutinizing gatekeepers—such as auditors and underwriters—responsible for facilitating these firms' access to American markets [1].

SEC Chairman Paul S. Atkins emphasized the agency’s unwavering commitment to protecting U.S. investors. In public remarks, he stated that while the SEC welcomes global companies to the U.S. capital markets, it will not tolerate “bad actors” who exploit international borders to evade U.S. investor protections. The task force is designed to consolidate the SEC’s investigative efforts and ensure that it can respond effectively to transnational fraud [2]. These efforts are part of a broader strategy that includes collaboration with other divisions within the SEC, such as the Divisions of Corporation Finance, Examinations, and Trading and Markets, as well as the Office of International Affairs. The agency is also considering potential rule changes and new disclosure requirements to further strengthen investor safeguards [1].

The Cross-Border Task Force will pay particular attention to firms from jurisdictions where governmental control and other local factors pose heightened risks to investors. One such jurisdiction highlighted in the SEC’s announcements is China, where the agency has observed unique vulnerabilities in its regulatory environment. The focus on China is part of a larger context involving increased scrutiny of cross-border market activity, especially as global capital markets become increasingly interconnected [2]. The agency’s decision to target these risks underscores its recognition of the complexities inherent in international securities regulation and its determination to apply U.S. standards to protect domestic investors from foreign-based misconduct.

In parallel with the SEC’s actions, Nasdaq has proposed new listing rules aimed at curbing potential fraud and manipulation in the context of small Chinese stocks. Following concerns raised by industry experts and investor advocates, the exchange operator announced plans to require Chinese companies—particularly those operating in Hong Kong and Macau—to raise a minimum of $25 million in initial public offerings (IPOs) to list on Nasdaq. Additional measures include raising the minimum float for future listings to $15 million and accelerating delistings for companies that no longer meet standards [3]. These changes are under review by the SEC and reflect a growing industry-wide recognition of the risks associated with the listing of speculative companies from foreign jurisdictions.

The proposed Nasdaq reforms are driven by a pattern of volatility in small Chinese stocks, with many rising sharply before collapsing. The exchange has noted that nearly 70% of its referrals to the SEC and the Financial Industry Regulatory Authority (FINRA) since August 2022 have been related to trading in Chinese companies, despite these firms representing less than 10% of Nasdaq’s overall listings [3]. This imbalance has fueled criticism that Nasdaq’s existing listing standards are too lenient, enabling the entry of dubious companies that may engage in fraudulent or manipulative practices. The reforms aim to address these concerns by raising the bar for new listings and enhancing oversight of companies already listed on the exchange.

The broader implications of these initiatives highlight the SEC’s and Nasdaq’s coordinated efforts to enhance transparency and accountability in international markets. As cross-border capital flows continue to expand, the agencies are working to ensure that U.S. regulatory frameworks remain robust enough to counter emerging risks. This approach aligns with broader geopolitical shifts, including the U.S. government’s consideration of decoupling Chinese companies from U.S. capital markets. The SEC’s task force, alongside Nasdaq’s proposed rules, represents a significant step in reinforcing investor protections and ensuring the integrity of U.S. financial markets in the face of complex global challenges.

Source:

[1] SEC Announces Formation of Cross-Border Task Force to Combat Fraud (https://www.sec.gov/newsroom/press-releases/2025-113-sec-announces-formation-cross-border-task-force-combat-fraud)

[2] U.S. Watchdog Targets Cross-Border Fraud with Dedicated Unit (https://www.financemagnates.com/forex/us-watchdog-targets-cross-border-fraud-with-dedicated-unit/)

[3] Pump-and-Dump Worries Prompt Nasdaq to Tighten China Rules (https://finance.yahoo.com/news/pump-dump-worries-prompt-nasdaq-121200564.html)