• 2013 Was a Busy Enforcement Year for the SEC
  • February 5, 2014 | Authors: Peter D. Fetzer; Terry D. Nelson
  • Law Firms: Foley & Lardner LLP - Milwaukee Office ; Foley & Lardner LLP - Madison Office
  • According to a recent report by the SEC, the SEC’s fiscal year that ended on 9/30/2013 included SEC enforcement actions in a record $3.4 billion in monetary fines against persons who violated the federal securities laws. In total, the SEC filed 686 enforcement actions during the year. The monetary penalties are 10 percent higher than in 2012 and 22 percent higher than in 2011.

    According to the SEC’s annual report, the SEC focused on a wide range of wrongdoers including:

    • Stock Exchanges - the SEC brought enforcement action against NASDAQ (a $10 million penalty) for its “poor systems and decision making” during the infamous Facebook initial public offering and the CBOE and an affiliate for “various systematic breakdowns.”
    • Gatekeepers - the SEC took action against so-called gatekeepers such as attorneys and accountants who failed to adequately safeguard investors’ interests. Among the gatekeepers, the SEC took action during the year against trustees and corporate directors for failing to uphold their responsibilities under the law.
    • Insider Trading - the SEC stepped up its enforcement actions against those persons who trade on material nonpublic information. During the 2013 fiscal year, the SEC filed dozens of cases alleging insider trading violations.
    • Municipal Securities - the SEC initiated enforcement actions in 2013 against municipalities and other participants for violations of anti-fraud provisions in connection with municipal securities offerings.
    • New Policy on Admissions - the SEC now requires admissions of misconduct in settlement of most enforcement cases. This is a material change from prior years when almost all settlements in enforcement actions resulted in the respondents neither admitting nor denying any violations.

    During the fiscal year, the SEC also employed certain new measures in order to increase its enforcement capabilities including the formation of new task forces to target certain problem areas within the industry, the increased sharing of information with other federal and state regulatory agencies to help such agencies bring enforcement actions against common targets, and improvement in applying its analytical capabilities to better detect fraudulent activities.

    The results from 2013 appear to indicate that the SEC will continue to build on its growing enforcement capabilities and actions. According to Mary Jo White, the SEC’s Chair, “a strong enforcement program [serves] to [help] produce financial markets with integrity and transparency, and [helps] to reassure investors that they can invest with confidence.”