The Cornerstone – NYU Pollack Center SEC Enforcement Report
Earlier this year the SEC published its enforcement statistics for fiscal 2023 which were discussed in this publication. Early next year we will publish enforcement statistics for calendar year 2023. And, Cornerstone Research and the NYU Pollack Center for Law & Business published a subset of the enforcement statistics for fiscal year 2003 in its publication, SEC Enforcement Activity: Public Companies and Subsidiaries, Fiscal Year 2023 Update (here) and discussed below. Each report typically contains key insights regarding SEC enforcement trends.
The statistics in the Cornerstone – NYU Report focus only on actions for the government fiscal year that involve public companies and their subsidiaries. The statistics compiled provide important insights into the work of the SEC enforcement division. Those statistics can be divided into four areas for discussion.
Filings and claims
In fiscal 2023 the SEC filed 91 enforcement actions against public companies and their subsidiaries. That represented a 34% increase over the prior fiscal year. At least part of the filings resulted from a series of sweeps conducted during the year that ended with 31 actions – about a third of those filed for the period – and a September push to file as the fiscal year drew to a close.
The allegations centered largely on issuer reporting and disclosure questions which were involved in 41 of the 91 cases – the largest number recorded for the Cornerstone – NYU Report. Actions involving broker-dealers made up the second largest group of cases while those centered on investment advisers & investment companies were next.
Sweeps
The sweeps, which are the focus of much of the enforcement activity detailed in the Report, were conducted in several areas:
–SPAC-related entities – 8 actions
–Failure to disclose complete information on Form NT – 3 actions
–Whistleblower Protection Rule – 3 actions
–Crypto-related – 2 actions
–Cybersecurity –2 actions
–ESG – 2 actions
Cooperation
Cooperation is often stressed by Commission officials when discussing enforcement. During the last fiscal year about 69% of the actions surveyed reportedly involved at least one cooperating pubic company or subsidiary. The exact impact of that cooperation can be difficult to ascertain as the following statistics illustrate:
–Last year there were 70 cooperating defendants
–87% of the cooperating defendants had monetary settlements imposed compared to 94% of the defendants without cooperation
–13% of cooperating defendants had no monetary settlements imposed – about three times the average rate for the period 2014 to 2022
–15 of the cooperating defendants were required to make admissions of guilt
Admissions
In fiscal 2023 sixteen public companies or their subsidiary defendants made an admission of guilt. Fifteen of those actions were brought as part of an ongoing sweep for recordkeeping failures.
Conclusion
The Report provides insight into SEC enforcement involving public companies and their subsidiaries. Enforcement is aggressive as reflected in the 34% increase in these cases. That trend is echoed in the high percentage of cases that had a monetary settlement imposed and the fact that fifteen of the cooperating defendants made admissions, not a typical requirement.
The Cornerstone – NYU Pollack Center SEC Enforcement Report
Earlier this year the SEC published its enforcement statistics for fiscal 2023 which were discussed in this publication. Early next year we will publish enforcement statistics for calendar year 2023. And, Cornerstone Research and the NYU Pollack Center for Law & Business published a subset of the enforcement statistics for fiscal year 2003 in its publication, SEC Enforcement Activity: Public Companies and Subsidiaries, Fiscal Year 2023 Update (here) and discussed below. Each report typically contains key insights regarding SEC enforcement trends.
The statistics in the Cornerstone – NYU Report focus only on actions for the government fiscal year that involve public companies and their subsidiaries. The statistics compiled provide important insights into the work of the SEC enforcement division. Those statistics can be divided into four areas for discussion.
Filings and claims
In fiscal 2023 the SEC filed 91 enforcement actions against public companies and their subsidiaries. That represented a 34% increase over the prior fiscal year. At least part of the filings resulted from a series of sweeps conducted during the year that ended with 31 actions – about a third of those filed for the period – and a September push to file as the fiscal year drew to a close.
The allegations centered largely on issuer reporting and disclosure questions which were involved in 41 of the 91 cases – the largest number recorded for the Cornerstone – NYU Report. Actions involving broker-dealers made up the second largest group of cases while those centered on investment advisers & investment companies were next.
Sweeps
The sweeps, which are the focus of much of the enforcement activity detailed in the Report, were conducted in several areas:
–SPAC-related entities – 8 actions
–Failure to disclose complete information on Form NT – 3 actions
–Whistleblower Protection Rule – 3 actions
–Crypto-related – 2 actions
–Cybersecurity –2 actions
–ESG – 2 actions
Cooperation
Cooperation is often stressed by Commission officials when discussing enforcement. During the last fiscal year about 69% of the actions surveyed reportedly involved at least one cooperating pubic company or subsidiary. The exact impact of that cooperation can be difficult to ascertain as the following statistics illustrate:
–Last year there were 70 cooperating defendants
–87% of the cooperating defendants had monetary settlements imposed compared to 94% of the defendants without cooperation
–13% of cooperating defendants had no monetary settlements imposed – about three times the average rate for the period 2014 to 2022
–15 of the cooperating defendants were required to make admissions of guilt
Admissions
In fiscal 2023 sixteen public companies or their subsidiary defendants made an admission of guilt. Fifteen of those actions were brought as part of an ongoing sweep for recordkeeping failures.
Conclusion
The Report provides insight into SEC enforcement involving public companies and their subsidiaries. Enforcement is aggressive as reflected in the 34% increase in these cases. That trend is echoed in the high percentage of cases that had a monetary settlement imposed and the fact that fifteen of the cooperating defendants made admissions, not a typical requirement.