SEC, Enforcement

The Securities and Exchange Commission filed 62 enforcement actions against public companies and their subsidiaries in the government’s 2017 fiscal year, a 33% drop from a year earlier. The cause of the drop was a paltry 17 cases filed in the second half of the year (April 1 to September 30), a period when the number of SEC actions usually increases.

Total monetary settlements against public company defendants also fell from the first half of fiscal 2017 to the second half, declining to $196 million from $1 billion.

The data, published Wednesday, are taken from the Securities Enforcement Empirical Database (SEED), a collaboration of New York University’s Pollack Center for Law & Business and Cornerstone Research.

The report did not give a reason for the drop in SEC cases, other than to say it corresponds to a change in leadership at the SEC. New SEC Chair Jay Clayton was confirmed by the Senate in May. In criticizing Clayton’s pro-industry leanings, Democrats have called him “one of the most loyal guardians of Wall Street.”

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The number of defendants cooperating with the SEC was also down in the second half of fiscal 2017, with only 32% cooperating (versus 63% in the first half).

In other findings from the SEED report:

  • “Issuer reporting and disclosure” continued to be the most frequent type of allegation against public-company defendants, accounting for 39% of enforcement actions.
  • There were 10 actions involving violations of the Foreign Corrupt Practices Act in fiscal year 2017, but only two after February. The report attributed this to the departure of Kara Novaco Brockmeyer, chief of the SEC’s FCPA unit since 2011.
  • Penalties in the second half of fiscal year 2017 accounted for only 16% of total settlements, the lowest percentage for any half-year since SEED began tracking enforcement data in 2010.
  • Allegations against investment advisers or investment companies were the most frequent type of enforcement action in the second half. “This is consistent with [Clayton’s] testimony that the commission … intends to focus more on investment professionals.” the report said.

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