The number of enforcement actions initiated by the Securities and Exchange Commission has steadily increased over the past six fiscal years, reaching a record high in 2015, according to a new report released today.

The report, “SEC Enforcement Activity against Public Company Defendants: Fiscal Years 2010–2015,” draws on data from the Securities Enforcement Empirical Database (SEED), a collaboration between the NYU Pollack Center and Cornerstone Research that tracks and records information on SEC enforcement actions filed against public company defendants.

According to the report, the SEC initiated a record 807 enforcement actions in 2015, representing a 7 percent increase compared to the preceding record-breaking fiscal year of 2014, when the SEC initiated 755 enforcement actions. The latest numbers also represent a 10 percent increase above the median of 734 enforcement actions for fiscal years 2010 through 2015.

The increase in the number of SEC actions from 676 in FY 2013 to 807 in FY 2015 was fueled by an increase in the number of independent actions, which rose to a record high of 507 in FY 2015, according to the report. In FY 2015, independent actions comprised 63 percent of enforcement actions filed.

Administrative Settlements

The SEC increasingly favored its administrative forum for public company defendants, as constitutional challenges to these in-house actions continued to gain momentum. The proportion of actions brought as administrative proceedings more than tripled from 21 percent in FY 2010 to 76 percent in FY 2015.

In FY 2015, the SEC, for the first time, divided its reported enforcement actions into three categories:

Independent enforcement actions;

Follow-on administrative proceedings (actions used to impose additional sanctions against individuals, such as bars from practicing, based on prior litigated misconduct); and

Delinquent SEC filings.

In FY 2015, more than 80 percent of public company defendants resolved SEC enforcement actions on the same day they were initiated (concurrent settlements). In SEC actions brought as administrative proceedings, public company defendants settled 96 percent concurrently. For SEC enforcements filed as civil actions, public company defendants settled only 38 percent concurrently.  

Allegations against public company defendants since FY 2010 have concentrated on purported violations of issuer reporting and disclosure provisions of the securities laws and the Foreign Corrupt Practices Act. Together these accounted for at least 85 percent of actions in five of the past six fiscal years.

Cases involving issuer reporting and disclosure provisions violations increased sharply following the July 2013 announcement of a new SEC initiative aimed at preventing and identifying improper or fraudulent financial reporting. In FY 2013 through FY 2015, these cases on average represented more than 65 percent of public company defendant actions.

FCPA cases reached more than 50 percent in FY 2011. In FY 2015, the percentage of actions with public company defendants facing FCPA allegations was consistent with the average level of the preceding five years (33 percent).

The recent disparity in concurrent settlements across venues coincided with the SEC’s expanded use of administrative proceedings. “The vast majority of the uptick in the numbers of actions we have brought as administrative proceedings are settled actions,” Andrew Ceresney, Director of the SEC Division of Enforcement, said in a statement.

Monetary Penalties

During FY 2010 through FY 2015, the SEC imposed $3.7 billion in monetary penalties and disgorgements on public company defendants. Public company defendants paid a larger share of penalties and disgorgements relative to their share of the total number of SEC enforcement actions filed during this period.

Although actions against public company defendants accounted for an average of 4 percent of actions during FY 2010 through FY 2015, public company defendants in these actions accounted for more than 18 percent of all SEC monetary penalties and disgorgements imposed over the same period.

From FY 2013 through FY 2015, the majority of the largest penalties and disgorgements were imposed in actions the SEC brought as administrative proceedings.

The large increase in FY 2014 monetary penalties and disgorgements imposed against public company defendants was driven by administrative proceedings against four defendants, which together accounted for more than 65 percent of the FY 2014 total dollar amount.

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