Risk & Compliance

SEC Fines From Enforcement Hit Record $4.68B

The number of new enforcement actions fell 17% this year but the SEC opened more than 150 COVID-related inquiries and investigations.
Matthew HellerNovember 3, 2020

The U.S. Securities and Exchange Commission obtained a record amount in fines for corporate wrongdoing this year despite a decline in the number of enforcement actions due to disruptions to casework caused by the COVID-19 pandemic.

In an annual report, the SEC said disgorgement and penalties resulting from judgments and orders totaled about $4.68 billion, an increase of 8% over 2019 that was fueled by major awards against companies including Telegram Group ($1.2 billion) and Wells Fargo ($500 million).

The number of newly filed SEC actions in 2020 declined 23% to 405 while total actions, including follow-on administrative proceedings and delinquent filings, fell 17% to 715. SEC staff had to shift to telework in March because of the pandemic.

SEC Chair Jay Clayton

“This year’s report highlights enforcement’s extraordinary efforts across the country to identify wrongdoing and take meaningful action to protect American investors from misconduct, including in the face of the many challenges imposed by COVID-19,” SEC Chairman Jay Clayton said in a news release.

The commission singled out its efforts to “prevent potential fraud related to the COVID-19 pandemic and bring actions against wrongdoers who attempted to capitalize on it.” From mid-March through the end of the fiscal year, the enforcement division opened more than 150 COVID-related inquiries and investigations.

The investigations, and the resulting trading suspensions and fraud actions, “meaningfully changed the landscape for investors during a period of significant market uncertainty,” the SEC said.

Kathleen Marcus, a shareholder at the Stradling law firm, told The Bond Buyer that the pandemic “slowed some investigations, not necessarily because the staff transitioned to work-from-home, but because the logistics of managing investigations became more challenging from virtual testimony to delays in obtaining documents.”

She and others believe an uptick in whistleblower cases could mean a busy enforcement staff in the next year or two.

In 2020, the SEC awarded $175 million to 39 whistleblowers, both the highest dollar amount and the highest number of individuals in history. The commission last month made its largest award ever — more than $114 million — to a whistleblower whose information led to successful SEC and related actions.