Cornerstone-NYU on SEC Public Company and Subsidiary Cases

Cornerstone Research and NYU Pollack Center for Law and Business published their annual report on statistics and trends in SEC Enforcement actions involving public companies and subsidiaries on November 17, 2022 (here). The Report details a range of statistics that provides insight into the work of SEC enforcement.

The Report begins by noting that the number of actions filed against public company and subsidiary defendants increased to 68 in fiscal 2022. That represents an increase over the 53 such actions filed in FY 2021 and the 62 in 2022. It is less that the 95 cases filed in F 2019 and 73 initiated in FY 2018 however.

Perhaps the more interesting statistic in the Report is the number of cases in which the settlement was based on an admission of guilt. While the Commission under Chair Gensler previously announced it would seek such an admission in appropriate cases, in FY 2022 such an admission was required in 16 cases. Each of those actions was against a broker-dealer. Indeed, each of the broker-dealers that settled recordkeeping allegations with the Commission on September 27, 2022 was required to make such an admission.

The areas of focus in these cases during FY 2022 is identical to that of the prior fiscal year as to the leading category. In 2022 the largest concentration of public company and subsidiary cases involved issuer reporting and disclosure questions. That was followed by matters involving broker-dealers and then cases centered on investment advisers and investment company issues. In fiscal 2020 the lead category was also issuer reporting and disclosure. The second category, in contrast, involved investment advisers and investment companies while the third group focused on broker-dealers.

Most of the public company and subsidiary actions in fiscal 2022 were filed as administrative proceedings. That approach is consistent with the one taken by the Commission over the last several years. This trend is, in probability, the product of the fact that virtually all of these cases are settled and it is easier to initiated the proceeding in an administrative forum.

Finally, the Report notes that 63% of the public company and subsidiary cases brought in FY 2022 noted cooperation. That fact is consistent with the prior year when 62% of the cases noted cooperation. Despite the acknowledgement of cooperation by Commission, 97% of the settlements involved a monetary component, the highest percentage of any fiscal year in SEED. It is also consistent with the fact that in fiscal 2022 the percentage of actions that settled without a monetary component was the lowest in any fiscal year in SEED. Overall the Report provides a good insight into the work of SEC Enforcement and trends in its actions.

Tagged with: ,