SEC Lures Prime Enforcer Who Says Harder Punishment Is Coming

Since taking on on the Wall Avenue watchdog, Mr. Grewal has signaled larger fines for wrongdoing are on the horizon, together with efforts to take away extra malefactors from Wall Avenue jobs. “We are able to’t arrest them,” Mr. Grewal mentioned in an interview. “We are able to get them out of the business.”

Mr. Grewal’s lengthy profession in authorities, the place he navigated partisan politics and managed numerous law-enforcement companies and personnel, is uncommon for an SEC enforcement chief. The company’s head enforcer, certainly one of its highest-profile figures, is often a former prosecutor who rose to the highest ranks of the protection bar, the place they battled with the SEC and Justice Division on behalf of company purchasers.

Mr. Grewal, 48 years previous, was a federal prosecutor in New Jersey and New York earlier than he was tapped by two governors—one Republican and one Democrat—to supervise law-enforcement companies in his house state of New Jersey. These posts raised his profile and made him one of many nation’s most outstanding Sikh Individuals.

“I don’t suppose he has ever tried to be a politician, however he finally ends up succeeding in the best way a politician succeeds,” mentioned Jud Welle, a former prosecutor and colleague of Mr. Grewal who now leads cybersecurity investigations at Nardello & Co. “He treats folks with respect and takes care to not hustle by way of an interplay simply because folks is probably not serving his speedy curiosity.”

Mr. Grewal was born in Jersey Metropolis and grew up within the state’s northern suburbs. Diplomacy was his first selection of profession after graduating from Georgetown College, he mentioned, however a federal hiring freeze within the mid-Nineties blocked that path. He discovered his calling after Sept. 11, 2001, when tons of of Sikh Individuals have been victims of racial profiling and violent assaults dedicated by individuals who mentioned they have been taking revenge over the terrorist assaults. (Working towards Sikh males put on a turban and a beard. Their religion, based mostly on the worship of 1 God and a perception in social justice and equality, is the fifth-largest unbiased world faith.)

Then a younger lawyer in personal follow, Mr. Grewal mentioned he absorbed racist taunts directed at him as he walked round downtown Washington a couple of days after 9/11. At his legislation agency, he felt excluded from consumer conferences earlier than discovering a mentor who helped him advance. He determined to grow to be a federal prosecutor, believing he might change folks’s misunderstandings and biases as a member of legislation enforcement.

Adam Abensohn, a buddy from their shared time within the Brooklyn U.S. legal professional’s workplace, mentioned Mr. Grewal was a intelligent and resourceful younger prosecutor whose potential to attach with folks and earn their belief set him aside.

“He mentioned one thing that caught with me: that he took an incredible quantity of delight in standing in entrance of a jury and saying he represented america, and inflicting some individuals who is perhaps shocked by that to see that somebody who seems to be like him can symbolize the U.S. and symbolize the easiest of us,” Mr. Abensohn mentioned.

Later, as a federal prosecutor in Newark, N.J., Mr. Grewal led the economic-crimes unit, together with overseeing the prosecution of merchants who illicitly obtained market-moving company information stolen by hackers. He additionally received a case towards convicted Ponzi schemer Eliyahu Weinstein, whose 24-year sentence was commuted in January by then-President Donald Trump. Mr. Grewal wrote on Twitter on the time that he was “disgusted” by Mr. Trump’s transfer, saying it was “one huckster commuting the sentence of one other.”

In 2018, Mr. Grewal grew to become the nation’s first Sikh state legal professional common when Democratic Gov. Phil Murphy elevated him from Bergen County prosecutor, a task to which he was nominated by former Republican Gov. Chris Christie. As legal professional common, he carried out new use-of-force insurance policies for New Jersey’s 37,000 law enforcement officials and intervened in a case to protect deportation protections for immigrants enrolled within the Deferred Motion for Childhood Arrivals program, which a federal decide invalidated in July.

He additionally oversaw the state’s securities regulators however didn’t immediately work on their instances. Simply after Mr. Grewal left state authorities to work for the SEC, New Jersey grew to become the primary state to order BlockFi Inc., a well known cryptocurrency firm, to cease providing unregulated interest-bearing accounts for crypto deposits. The state mentioned BlockFi didn’t deal with the product as a safety, which might have required registration with the state.

BlockFi has mentioned the accounts are authorized and proceed to be allowed in New Jersey whereas the corporate discusses the matter with the state.

Working in New Jersey’s political system was grueling, Mr. Grewal mentioned, and he was contemplating his future when a prime adviser to SEC Chairman Gary Gensler contacted him in Could. The company wanted a brand new enforcement director when Mr. Gensler’s first selection for the job resigned after a decide questioned her conduct in a lawsuit involving Exxon Mobil Corp.

A number of progressive economic-policy teams cheered Mr. Grewal’s rent, having criticized Mr. Gensler’s first selection for director as a result of her expertise largely concerned representing companies in authorized battles. Different specialists say Mr. Grewal’s lack of expertise within the personal sector might make him too susceptible to punish misconduct as intentional when it actually stemmed from errors or negligence.

“That’s the place you see pro-regulatory and pro-prosecutorial attitudes sweeping too broadly, and that impacts the efficiencies of the market,” mentioned Andrew Vollmer, a former SEC deputy common counsel now affiliated with the Mercatus Heart at George Mason College. “The massive concern about Grewal is he has a prosecutor’s mentality.”

Since becoming a member of the SEC, Mr. Grewal has given a number of speeches speaking powerful about the way forward for enforcement, together with that penalties may need to go up if corporations or people are repeating unhealthy acts that the SEC has recurrently punished.

Chatting with the New York Metropolis Bar Affiliation final month, Mr. Grewal mentioned some Individuals have grown cynical about how enterprise and authorities companies work together, partly because of “the notion that we, the regulators, are failing to carry them appropriately accountable, or worse nonetheless, the assumption by some that there are two units of guidelines.”

Harder sanctions would possibly assist fight that view, he mentioned. The SEC will search to require some defendants to confess to wrongdoing once they settle, a tactic the company tried in the course of the Obama administration however used sometimes as a result of admissions can damage corporations in associated personal litigation. (SEC defendants usually settle instances with out admitting or denying the company’s claims.)

Mr. Grewal mentioned he received’t be a spokesman for the large social and political points he confronted as legal professional common. However “as a visual minority,” he can nonetheless have an effect on how American companies and massive legislation corporations follow inclusion.

“Possibly once you see folks like me on this place, a legislation agency is extra attentive to range points and it’s OK,” he mentioned. “As a result of after I was there, I felt prefer it wasn’t OK to appear to be me.”

Write to Dave Michaels at dave.michaels@wsj.com