The Securities and Exchange Commission announced that in fiscal year 2015, it continued to build a strong record of first-of-their-kind cases that spanned the spectrum of the securities industry.
The SEC’s increase in enforcement actions is significant. The SEC’s independent enforcement actions have increased substantially since 2013, up to 507 actions from 341. This has resulted in disgorgement and penalties to increase from $3.4 billion dollars in 2013 to $4.19 billion dollars in 2015.
To that end, in the fiscal year that ended in September, the SEC filed 807 enforcement actions covering a wide range of misconduct, and obtained orders totaling approximately $4.2 billion in disgorgement and penalties. Of the 807 enforcement actions filed in fiscal year 2015, a record 507 were independent actions for violations of the federal securities laws and 300 were either actions against issuers who were delinquent in making required filings with the SEC or administrative proceedings seeking bars against individuals based on criminal convictions, civil injunctions, or other orders.
The following are a sample of the variety of enforcement issues the SEC addressed this past year:
- Financial reporting remained a key enforcement priority and this past fiscal year involved a number of significant financial fraud and issuer disclosure matters, including actions against companies and executives.
- Charged 87 parties in cases involving trading on the basis of insider information. Many of these cases involved complex insider trading rings which were cracked by Enforcement’s innovative uses of data and analytics to spot suspicious trading.
- Brought a first-ever action for failure to report a material compliance matter to a fund board against Blackrock Advisors LLC, arising from the firm’s failure to disclose a conflict of interest created by the outside business activity of a top-performing portfolio manager. The SEC also charged Blackrock’s former CCO.
- Filed several actions to halt international investment frauds, including those that targeted, among others, immigrant communities.
- Filed significant actions under the Foreign Corrupt Practices Act (FCPA) against Bio-Rad Labratories Inc., Avon Products Inc., Goodyear Tire & Rubber Company, BHP Billiton and Hitachi.
- Charged a Wisconsin-based investment advisory firm and its owner for fraudulently “cherry-picking” winning options trades. Those trades were identified with help from the agency’s Division of Economic and Risk Analysis (DERA), which conducted a statistical analysis to determine whether the trades at issue could have resulted from a coincidental or lucky combination of trades.
The ultimate take away is that the cost of non-compliance with federal securities laws is not only increasing, it is becoming a significant number.
For more information on the report on enforcement activity, click here.