SEC targeting cross-border fraud, with a focus on Chinese companies & gatekeepers

The SEC has launched a new task force to combat fraud involving foreign-based companies. The task force will focus on market manipulation schemes like “pump-and-dumps” involving Chinese and other foreign issuers. These enforcement efforts will also be directed at US-based gatekeepers such as auditors and underwriters that assist foreign issuers with accessing the US capital markets. 

Background

On September 5, the Securities and Exchange Commission (SEC) announced a new task force to combat cross-border fraud directed at US investors.¹ The initial focus of the cross-border task force will be market manipulation schemes such as “pump-and-dumps,” but the task force will more broadly investigate other types of securities law violations by companies “from foreign jurisdictions, such as China, where governmental control and other factors pose unique investor risks.”² In addition, the task force will specifically target gatekeepers, particularly auditors and underwriters, that facilitate foreign access to the US capital markets.³

Pump-and-dump schemes refer to efforts to artificially inflate the price of a security through misleading marketing or trading practices, then selling shares at the elevated price. After those responsible for the scheme sell shares to unwitting purchasers, the price crashes, and purchasers are left with a loss.

Pump-and-dump schemes are not new. In fact, this type of market manipulation activity has been alleged and proven in a wide variety of circumstances for decades. The SEC has long focused enforcement resources, including data analytics, on combating pump-and-dumps, through the work of the Market Abuse Unit and the Microcap Fraud Task Force.

Recently, there has been an uptick in suspected pump-and-dump schemes by US-listed foreign companies.⁴ This trend comes amidst a record number of Chinese companies going public on US exchanges.⁵ In response, NASDAQ recently implemented a new rule requiring Chinese companies looking to list on the exchange to have a minimum value of $25 million.⁶

As the SEC recalibrates its enforcement priorities under the new administration, with a renewed focus on fraud cases that result in US investor harm, the agency has once again prioritized pump-and-dump schemes in its enforcement program. The SEC’s new focus on foreign-based issuers reflects both the reality of an increase in suspected cases of manipulation involving foreign companies, as well as the broader shift of federal enforcement priorities from domestic actors to overseas ones who harm US investors.

We note that there has been no change in the interpretation of laws governing market manipulation or in the manner in which the SEC intends to enforce these laws. The recent announcement simply signals that the SEC will direct its attention toward US-listed foreign companies involved in market manipulation, as well as those gatekeepers who enable these activities.

Focus on Gatekeepers

When pump-and-dump schemes involve foreign issuers, the agency’s enforcement efforts are typically directed at US-based gatekeepers, including auditors, underwriters, broker-dealers, and law firms that assist the issuer. The SEC’s press release announcing the new task force confirmed this focus.

As such, auditors, underwriters, and other gatekeepers should carefully scrutinize information received from foreign companies seeking to participate in the US capital markets. Gatekeepers should remain vigilant for indications of fraudulent activities, such as unusual insider trading, rapid fluctuations in stock price, accounting issues, disclosure issues, or other controls deficiencies, particularly where they involve foreign issuers operating in opaque regulatory jurisdictions.

Focus on Chinese Companies

China is the only foreign country specifically named in the press release announcing the cross-border task force, signaling the SEC’s particular focus on Chinese issuers. While the initial focus will be on market manipulation, the task force will also investigate other securities law violations involving Chinese companies. 

This is in line with larger concerns about the role of Chinese issuers in the US capital markets. On May 20, 2025, for example, state regulators called on SEC Chairman Paul Atkins to take measures against perceived accounting and disclosure fraud by Chinese companies that are publicly listed in the US.⁷ Weeks earlier, on May 2, 2025, Congress similarly conveyed to Chairman Atkins concerns that US-listed Chinese companies benefit from American investor capital while advancing strategic objectives of the Chinese government.⁸ Perhaps in response to these concerns, Chairman Atkins has directed the SEC’s various divisions and offices “to consider and recommend other actions that would better protect US investors, including new disclosure guidance and any necessary rule changes.”⁹

Consistent with the new administration’s “America First” approach that aims to prioritize both investor protection and national security, we expect that international companies—especially those in China—will be subject to heightened scrutiny at least through 2028.

Conclusion

Going forward, as regulatory scrutiny intensifies of foreign entities seeking access to the US markets—particularly Chinese companies—stakeholders should proactively enhance their compliance programs, including their policies and procedures. Foreign issuers should increase efforts to ensure that filings with the SEC are materially accurate and that they maintain robust internal accounting and disclosure controls. Auditors, underwriters, broker-dealers, law firms, and other gatekeepers should reinforce their due diligence procedures in order to mitigate risks of fraud.

The task force and its initial focus on international market manipulation and fraud may signal the beginning of heightened scrutiny of foreign-based US issuers more broadly. Accordingly, foreign public issuers and companies that facilitate their access to US securities markets should continue to closely monitor the SEC enforcement landscape in the months ahead.

^{1 See Press Release, SEC Announces Formation of Cross-Border Task Force to Combat Fraud, US Sec. & Exch. Comm’n (Sept. 5, 2025), available here.
2 Id.
3 Id.
4 George Steer, ‘I almost fell off my chair’: Investors lose billions on meme stocks as ‘pump and dump’ scams multiply, Financial Times (Aug. 18, 2025), available here.
5 Id.
6 See Nasdaq Proposes Changes to its Listing Standards, Nasdaq (Sep 3, 2025), available here.
7 See Letter to Chairman Atkins from State Financial Officers (May 20, 2025), available here.
8 See Letter to Chairman Atkins from the House Select Committee on the Strategic Competition Between the United States and the Chinese Communist Party and the Senate Committee on Aging and Members of Congress (May 2, 2022), available here.
9 See Press Release, SEC Announces Formation of Cross-Border Task Force to Combat Fraud, US Sec. & Exch. Comm’n (Sept. 5, 2025), available here.}

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