NYC FINANCIAL has had enough of regulators’ attempts to seize its $500 million in assets.
On Wednesday, the regulator’s top law officer, Richard Cote, warned that companies cannot claim “self-defense” in the face of a massive crackdown.
In an op-ed published in The New York Times, Cote warned that a “law that purports to protect the interests of individuals” is actually a “criminal law designed to silence those who speak out against wrongdoing.”
The legal theory behind Cote’s claim is that the SEC is violating federal law by allowing public companies to take money from shareholders without the company being charged with wrongdoing.
The SEC and other regulators have taken a variety of actions against public companies in the past, but Cote argues that they were unnecessary.
“This is an effort to impose a new and more stringent standard for the public to meet, one that is far more lenient than those imposed on private entities,” he wrote.
The idea behind Cotes proposal is that private companies can claim self-defense in the event that they are being targeted by a government agency, as long as the company’s actions are “necessary to prevent a violation of the securities laws.”
The SEC’s case against the company is just one of many cases that the regulator has been involved in.
Last year, the agency also launched a “straw man” lawsuit against former Tesla CEO Elon Musk, accusing him of running an illegal money-laundering scheme.
A federal judge has already ruled in Musk’s favor, and the SEC has not been shy about pushing back against the agency in recent years.
Last month, Cotes warned that the agency would be prepared to pursue civil penalties against “any and all” companies that fail to disclose the identity of a government employee who works for them.
Cote also pointed to the “incredibly broad and overbroad” powers the SEC can now claim.
“When the agency is pursuing a private company for money laundering, it can claim to be acting in the best interest of the investor, which is an extraordinarily broad and expansive claim,” Cote wrote.
“To me, that means that the same entity could be charged with a criminal violation, even though the SEC was acting in good faith, even if that entity was engaged in money laundering.”