The SEC filed a record number of enforcement actions during FY 2015, but the aggregate value of fines, penalties, and disgorgements the agency collected during the fiscal year was well below the prior year’s total and long term averages, according to a detailed January 12, 2016 report produced in cooperation between the NYU Pollack Center for Law Business and Cornerstone Research. The report, which can be found here, is entitled “SEC Enforcement Activity Against Public Company Defendants: Fiscal Years 2010-2015,” is based on date collected in the Securities Enforcement Empirical Database (SEED), which is an online resource the two organizations sponsor and that provides data on SEC actions filed against public companies traded on the U.S. exchanges. The January 12, 2016 press release that accompanied the report can be found here.
According to the report, the SEC filed a record 807 enforcement actions in FY 2015, compared to 755 actions in 2014 (representing a 7% increase) and compared to the FY 2010-FY 2015 annual median number of enforcement actions of 734.5 (representing a 10% increase). The agency’s fiscal year runs from October 1 to September 30. The increase in the number of SEC actions from the 676 filed in FY 2013 to the 807 filed in FY 2015 was fueled by an increase in the number of independent actions the agency filed in 2015 (an “independent action” is an action alleging a violation of the federal securities laws that do no involve either delinquent filings or follow-on administrative proceedings). 507 of the FY 2015 filings involved independent actions, representing about 59% of all FY 2015 actions.
In five of the last six fiscal years, actions alleging violations of Issuer Reporting and Disclosure provisions of the federal securities laws and violations of the FCPA have represented at least 85 percent of the actions. In FY 2015, these kinds of allegations also were involved in 85 percent of all enforcement actions. The number of cases involving alleged disclosure and reporting violations increased sharply following the agency’s July 2013 announcement of a new SEC initiative to identify fraudulent financial reporting. From FY 2013 through FY 2015, these cases on average represented more than 65 percent of public company defendant actions.
In FY 2015, the agency filed 33 enforcement actions against public company defendants, representing about 4% of all SEC enforcement actions during the fiscal year. The number of public company enforcement action in 2015 was about the same as in FY 2014, when there were 34 public company enforcement actions, and slightly above the FY 2010-FY 2015 annual average number of public company enforcement actions of 31.33.
During FY 2014 and FY 2015, there was a dramatic shift on the agency’s venue of choice for enforcement actions involving public companies. During the period FY 2010 through FY 2013, roughly about a third of the public company enforcement actions were filed in the agency’s administrative court. However, in FY 2014 and FY 2015, about t two thirds of the public company enforcement actions were filed in the agency’s administrative court. In FY 2015, 76 percent of the agency’s public company enforcement actions were filed the SEC’s administrative courts.
During FY 2015, 82 percent of public company defendants resolved their SEC enforcement actions the same day as the actions were initiated (what the report refers to as “concurrent settlements”). These kinds of case resolutions often follow months or years of SEC investigation. For example, in FY 2014, the average time between wen the SEC opened an investigation and commenced an enforcement action was 21 months. The vast majority of public company administrative enforcement proceedings have concurrent settlements.
However, the fraction of public company defendants in civil actions with concurrent settlements has generally decreased over time; in FY 2015, only 38% of the public company civil enforcement proceedings involved concurrent settlements. The press release accompanying the report quotes NYU Law Professor Stephen Choi as saying that the recent disparity in the number of concurrent settlements between administrative actions and civil actions “appears to be driven by the Commission’s expanded use of administrative proceedings.”
During the period FY 2010 through FY 2015, the SEC imposed $3.7 billion of monetary penalties and disgorgements on public company defendants, for an annual average of around $620 million. The $547 million in total penalties and disgorgements in FY 2015 was well below the $1.254 billion collected in FY 2014. (The high levels of impositions in FY 2014 were driven by proceedings against four defendants which together accounted for more than 65 percent of the FY total.) Though public company defendants represented only about four percent of all defendants during the period FY 2010 and FY 2015, the imposition in the actions against public companies accounted for about 18 percent of all SEC monetary penalties during that period.
During the last six fiscal years, the SEC has imposed penalties and disgorgements of $100 million or more on ten public company defendants, accounting for almost 55 percent of the monetary total obtained from public company defendants. The highest amount imposed during that period was an award of $525 million in 2013. The largest award imposed in FY 2015 was $190 million.
My prior post about NYU’s and Cornerstone Research’s SEED database can be found here.