Trends in SEC Enforcement – 4Q23: Part I
Understanding the trend of SEC enforcement is an important consideration for virtually any business. From public companies, whose shares are registered with the agency and whose reports are on file with it, to market professionals such as brokers, dealers, investment advisers and investment companies, all of whom are regulated by the Commission, the focus and direction of SEC enforcement is an important consideration.
Even private firms have an interest in the path of the Commission’s enforcement program since the agency can, and often does, file cases against business enterprises whose shares are not publicly traded as well as individuals. And, everyone who uses the public securities markets is protected by the enforcement actions brought by the SEC.
This article is one of a series published each quarter which charts the trend of SEC enforcement. These quarterly publications are designed to provide those in the market place with timely information about trends in SEC enforcement to aid their business activities. This is Part I of a series analyzing the results from 4Q23.
The number of cases and the largest areas of concentration during the quarterly period are typically significant. While the number of cases filed is not critical standing alone, the trends revealed by examining those cases can, and typically provide important information regarding the direction of the enforcement program.
During the fourth quarter of 2023 the Commission filed a total of 43 enforcement actions. All but 10 of those actions were civil injunctive cases filed in federal court. The number of cases filed in the last quarter of 2023 is the lowest for the year. In the first quarter of 2023 a total of 80 enforcement actions were filed while 46 cases were initiated in the second quarter. That number jumped to 144 for the third quarter.
Similarly, the number is lower than that for the last quarter of 2022 and 2021. In the fourth quarter of 2022 143 cases were filed while in 2021 there were 48 cases initiated during the same period.
The largest categories of cases filed during the last quarter of 2023 were:
Offering fraud actions 30%
Insider trading 10%
False statements 6.9%
The other cases filed during the period were scattered among nineteen different areas. Those included misrepresentations, transfer agents, the custody rule, free riding and crypto assets.
In contrast, during the fourth quarter of 2022 the largest categories of cases were:
Investment advisers 18.8%
Insider trading 13.5%
Corporate & financial 7.5%
Thus, only one category was the same as in 4Q23 – insider trading, long a key area of focus for the Enforcement Division.
The results for the same period in 2021 are similar to those for 2022 but again, differ from those for 2023:
Investment advisers 16%
Insider trading 12.5%
Corporate & financial 10%
The results from 2023 suggest a possible change in focus of the enforcement program, concentrating on offering fraud cases and those involving false statements rather than investment advisers and corporate and financial issues. Thus, the last quarter of 2023 may suggest and shift in focus for the enforcement program, a point which cannot be ascertained until at least part of the results from 2024 are analyzed.
Next: Examples of the cases filed in the largest categories listed above.