SEC Announces Year-End Enforcement Results, Emphasizing Record-Setting Penalty Awards
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  • SEC Announces Year-End Enforcement Results, Emphasizing Record-Setting Penalty Awards
     
    11/22/2022

    On November 15, 2022, the Securities and Exchange Commission (“SEC”) released its summary of enforcement actions for the 2022 fiscal year, which ended on June 30, 2022.  The SEC announced that it filed 760 enforcement actions, a nine percent increase over 2021.  The actions resulted in orders of a record-breaking $6.439 billion to be paid to the SEC, including roughly $4.2 billion in penalties.  The SEC noted that the high numbers reflect its “sense of urgency to protect investors, hold wrongdoers accountable and deter future misconduct in our financial markets.”[1]

    In its press release, the SEC highlighted the enforcement actions that resulted in the largest penalties, including, for example, its recent actions alleging record-keeping violations against various broker-dealers; a June 2022 enforcement action against a leading audit firm for its audit professionals allegedly cheating on the ethics component of the CPA exams, which resulted in a $100 million penalty, the largest penalty ever imposed by the SEC against an audit firm; and a separate action that resulted in a $200 million penalty against a global bank in conjunction with allegations of over-issuance of securities in violation of Section 5 of the Securities Act.  And the SEC walked through its most significant matters from every area of focus — including alleged financial fraud and issuer disclosure, insider trading and registration violations in the crypto asset space, failures to comply with cybersecurity obligations, violations by private funds for concealment of risks, failing to accurately report client financial statements, misappropriating investor funds, and various insider trading schemes.

    The SEC also highlighted its continued focus on individual accountability, noting that more than two-thirds of the SEC’s stand-alone enforcement actions involved an individual defendant.  And the SEC also emphasized that it is continuing to expand the broad array of tools it uses to identify and investigate potential violations of the securities laws.  The press release touted the Commission’s use of data analytics in various cases, and its Whistleblower program (which resulted in the grant of 103 awards for a total of $229 million in FY 2022), and the continued cooperation it receives from individuals and entities facing investigations.  Regarding the cooperation, the press release stated that there were often no penalties or significantly limited penalties imposed for entities that cooperated with the SEC investigations, but as in prior years the price measurement of the value of such cooperation across cases was difficult to assess from the overall results.

    The bottom line is that FY 2022 was a big year for the SEC’s Enforcement Division.  The Enforcement Division has been unabashedly aggressive, and the results reflect that.  Absent a meaningful political shift or significant in-court setbacks, there is no reason to expect it to change the approach in FY 2023.

     

    [1] U.S. Securities and Exchange Commission Press Releases, SEC Announces Enforcement Results in FY22 (November 15, 2022).

    CATEGORIES: SEC, Whistleblower

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