Risk & Compliance

SEC Fines, Disgorgement Hit $3.9B in 2018

The agency "continues to be extremely successful in its efforts to deter bad conduct and effectively remedy harm to investors."
Matthew HellerNovember 5, 2018

The U.S. Securities and Exchange Commission filed 9% more enforcement actions in fiscal 2018 despite budgetary constraints, obtaining more than $3.9 billion in disgorgement and penalties.

The commission said in its annual report that enforcement actions totaled 821, up from 754 in fiscal 2017. Disgorgement and penalties rose from $3.7 billion the previous year, with $794 million being returned to harmed investors.

“The Enforcement Division has been and continues to be extremely successful in its efforts to deter bad conduct and effectively remedy harm to investors,” SEC Chairman Jay Clayton said in a news release.

The report noted that the SEC had a successful year despite facing “significant challenges,” including personnel cutbacks due to budgetary constraints.

“We have lost many of our contracted legal support personnel and we have been subject to an agency-wide hiring freeze, limiting our ability to replace employees who have departed,” it said.

Among the enforcement actions in 2018, 490 were “stand alone” cases, with about two-thirds of those cases involving investment advisory issues, securities offerings, and issuer reporting/accounting and auditing.

In the biggest case of the year, Brazilian oil giant Petrobras agreed in September to pay a $853 million penalty and $933 million in disgorgement and prejudgment interest to settle charges related to a massive corruption scandal.

But the commission said a Supreme Court decision in June 2017 “may cause us to forego up to approximately $900 million in disgorgement, of which a substantial amount likely could have been returned to retail investors.”

The ruling in the case of Kokesh v. SEC found the agency faced a five-year statute of limitations for pursuing disgorgement claims.

The SEC, which has been stepping up its scrutiny of cyber-related misconduct, said it had brought 20 stand alone cyber cases in 2018, including cases involving initial coin offerings and digital assets. At the end of the fiscal year, it had more than 225 cyber-related investigations ongoing.

Some ICOs, the SEC said, “are simply outright frauds cloaked in the veneer of emerging technology.”