Trends in SEC Enforcement: 2022 – A Cop on Every Corner – Conclusion
The year 2022 was good by any measure for SEC Enforcement. To be sure limitations imposed on the investigative process by the great COVID pandemic persisted. Investigative testimony was taken by remote, not sitting across a conference room table from the witness. While the process for taking testimony by remote continues to improve, there is no substitute for facing the witness and watching the reaction to various questions and exhibits.
The same limitation impacted depositions in litigation. Depositions, like investigative testimony, was taken largely by remote rather than live in a conference room. Accordingly, evidence development in 2022 was impeded by pandemic caused restrictions during investigations and litigations.
Despite the limitations, the Commission filed just under 500 new enforcement actions. That is the largest number of enforcement actions filed in a calendar year in recent years. While it is undisputed that the number of enforcement actions initiated is not a measure of a program’s success, it is significant since initiating a large number of cases gives at least some indication of presence of the agency in the market-place to monitor events.
Perhaps the best indicator of the success of the enforcement program is the increasing number of areas in which enforcement actions were brought in 2022. A quick review of the cases discussed in earlier segments of this article gives some indication of the extensive reach of the enforcement division in 2022. That segment of this article lists cases in seventeen different areas. The examples cover topics ranging from free riding, touting, financial fraud and Reg FD to privacy. And, there were cases in more areas than those listed earlier.
While the Commission’s enforcement program has long been viewed as one of the best in Government, in recent years it has continued to improve. To be sure, the whistleblower program has been a great asset to the Division.
There is more, however. Data analytics and the Division’s investigative techniques continue to improve. Many consider the Commission’s use of data analytics and related techniques to be the best in government. The agency does not disclose just how its techniques work. The example of two new insider trading cases developed through data analytics cited in a press release last year does give some indication. There, despite the fact that the cases appeared to be unrelated while both were uncovered through data analytics at least suggests that a detailed analysis of the risks gleaned from the data may have aided in uncovering the cases.
Whatever the Division’s secret, however, it is effective. Increasing numbers of enforcement actions in a wide variety of areas is not just an interesting talking point but important to effective enforcement. This is because it helps create the impression of “omnipresence” – being everywhere. That kind of presence can only serve to reassure investors who seek to rely on the integrity of the market-place as they put their money at risk by making an investment.