The Securities and Exchange Commission (SEC) has launched a Cross-Border Task Force to investigate fraud involving foreign-based companies, with a focus on market manipulation schemes like “ramp-and-dumps” and misconduct by gatekeepers – including auditors and underwriters – whose role in enabling access to US capital markets has been a focus of SEC scrutiny.
The Cross-Border Task Force will also prioritize enforcement against companies from countries where government control and other factors present heightened risks to investors. The announcement specifically references Chinese companies and parallels the Department of Justice’s (DOJ) recent prioritization of prosecuting white-collar crimes involving market manipulation by Chinese-affiliated variable interest entities (VIEs).
Below, we explore the Cross-Border Task Force’s primary focus, along with strategic implications and considerations for auditors and underwriters.
SEC’s Cross-Border Task Force: A new enforcement focus
The SEC’s new task force will consolidate investigative efforts across its divisions to target:
- Transnational market manipulation schemes, such as pump-and-dump and ramp-and-dump tactics
- Foreign-based issuers, especially those from jurisdictions like China, where state control and opaque governance structures pose heightened risks
- Gatekeepers, including auditors and underwriters, who facilitate access to US markets for these entities
SEC Chairman Paul Atkins has also directed other divisions of SEC, including Corporation Finance, Examinations, Economic and Risk Analysis, Trading and Markets, and the Office of International Affairs to explore new disclosure guidance and rule changes to better protect US investors from the risks posed by companies, intermediaries, gatekeepers or exploitative traders that “use international borders to frustrate and avoid U.S. investor protections.”
DOJ’s parallel focus: VIEs and national security
SEC’s announcement brings its enforcement priorities in line with DOJ’s criminal securities fraud goals. In a May 2025 memorandum, DOJ’s Criminal Division outlined its white-collar enforcement priorities, with a sharp focus on:
- Fraud involving VIEs, particularly those tied to Chinese-affiliated companies
- Ramp-and-dump schemes, elder fraud, and other forms of market manipulation
- Gatekeeper misconduct, including financial institutions and insiders facilitating transactions for hostile nation-states and transnational criminal organizations
DOJ’s and SEC’s priorities each reflect a broader “America First” enforcement posture, emphasizing national security, investor protection, and economic integrity.
Implications for auditors and underwriters
1. Auditors
SEC’s identification of auditors may be seen as a warning shot at clean audit opinions on public companies, particularly foreign issuers, that misrepresent their financials, and auditors who miss red flags and internal control weaknesses, fail to verify key data, or do not adequately scrutinize related-party transactions, especially in opaque jurisdictions.
Looking forward, auditors may consider:
- Enhanced scrutiny of audit quality and risk assessments for foreign issuer audits
- Increased liability exposure for audits of foreign issuers, especially those with opaque ownership or governance structures
- Reassessing client acceptance policies for clients operating through VIE structures or in high-risk jurisdictions
2. Underwriters
SEC’s cross-border enforcement initiative may encourage underwriters to sharpen their due diligence and remain vigilant for red flags. Lax underwriting procedures could be viewed by SEC as enabling high-risk or fraudulent foreign companies to access US capital markets.
Looking forward, underwriters may consider:
- Whether SEC is signaling a higher standard for reasonable due diligence for underwriting IPOs, certain corporate transactions such as reverse mergers, or secondary offerings involving foreign issuers
- Potential new disclosure requirements around VIE structures, beneficial ownership, and jurisdictional risks
- Enforcement risk if red flags related to issuer misconduct or control weaknesses are missed
Strategic considerations for other market participants
Given the coordinated enforcement posture and “America First” focus of SEC and DOJ:
- Financial intermediaries and public companies are encouraged to review their exposure to foreign issuers, especially those from higher-risk jurisdictions such as China
- Companies are encouraged to ensure the adequacy of their compliance programs and internal controls over financial reporting and may consider revising their policies as needed in light of SEC’s and DOJ’s new priorities
Learn more
For more information or to discuss how these developments may affect your business, please contact the authors or another member of our securities enforcement team.