by Anat Carmy-Wiechman and Giovanni Patti

In a new report, the NYU Pollack Center for Law & Business, in collaboration with Cornerstone Research, investigated recent trends in enforcement via the Securities Enforcement Empirical Database (SEED). Below, we highlight some of the key findings.

The SEC Filed 91 Enforcement Actions against Public Companies and
Subsidiaries in FY 2023

SEED currently provides data for SEC enforcement actions against public companies and their subsidiaries from October 1, 2009 through the present.[1] According to the report, “[t]he SEC filed 91 actions against public companies and subsidiaries in FY 2023, a 34% increase over the prior fiscal year.”

“Issuer Reporting and Disclosure” Was the Most Prevalent Allegation Type (45%)  

The report notes that “Issuer Reporting and Disclosure continued to be the most prevalent allegation type against public companies and subsidiaries, accounting for 45% of actions filed in FY 2023 more than 1.5 times as many actions as in FY 2022.” The report also shows that “[t]he percentage of FY 2023 actions involving Broker Dealer allegations declined relative to FY 2022, but remained slightly elevated at 19% in FY 2023 as compared to its historical average.” In addition, the report specifies that “[t]he percentage of actions involving Investment Adviser/Investment Company allegations continued to generally decline from an FY 2019 peak of 38%” and that “Foreign Corrupt Practices Act (FCPA) allegations accounted for 12% of public company and subsidiary actions in FY 2023.” Finally, according to the report, “Other allegation types accounted for 12% of FY 2023 actions, with five of those 11 actions brought as part of an SEC initiative focused on timely disclosure of insiders’ transactions and holdings.” 

SEC Settlements: 69% of Defendants Noted Cooperation with the SEC

As described in the report, “[t]he SEC noted cooperation by 69% of public company and subsidiary defendants that settled in FY 2023, higher than the FY 2014–FY 2022 average of 61% and the third highest of any fiscal year in SEED.” As Professor Stephen Choi noted in the report, “The increase in actions coincided with above average levels of cooperation. Of the cooperating defendants, 20% were charged as part of the SEC’s sweep for off-channel communications recordkeeping failures.” In addition, the report indicates that “[o]f the 102 public company and subsidiary defendants that settled during FY 2023, 89% involved a monetary settlement, the lowest since FY 2013.”

SEC Settlements: Monetary Settlements Totaled $1.3 Billion in FY 2023

SEED tracks all monetary settlements imposed by the SEC on all types of defendants (including individuals and other entities) in actions against public companies and subsidiaries. The report indicates that “[t]otal monetary settlements imposed in public company or subsidiary actions in FY 2023 declined to $1.3 billion, the smallest in the last eight fiscal years and only 70% of the average annual monetary settlements of $1.9 billion for FY 2014–FY 2022.” The report also notes that “[t]he $1.3 billion in monetary settlements imposed in public company and subsidiary actions accounted for approximately 26% of the $4.9 billion FY 2023 total the SEC reported for all actions.”  

SEC Settlements: Disgorgement and Prejudgment Interest in Monetary Settlements Totaled $541 Million 

The report indicates that “[i]n FY 2023, disgorgement and prejudgment interest increased slightly to $541 million from $507 million in FY 2022. However, the FY 2023 amount was less than 60% of the FY 2014–FY 2022 average of $921 million.” In addition, the report shows that “FY 2023 had only 26% of actions with disgorgement and prejudgment interest as part of monetary settlements, lower than the average of 40% for FY 2014–FY 2022.”

SEC Settlements: 16 Defendants with Admissions of Guilt in FY 2023

As noted in the report, “SEED includes data on admissions of guilt by public company and subsidiary defendants. SEED considers a defendant to have an admission of guilt if the admission is in the SEC action, as opposed to a parallel action.” The report indicates that “[i]n FY 2023, there were 16 public company or subsidiary defendants that had an admission of guilt, equal to the record-high total number of admissions in FY 2022.” Finally, the report points out that “the majority (15) of the 16 public company or subsidiary defendants that had an admission of guilt were from actions brought as part of the SEC’s ‘ongoing sweep’ for recordkeeping failures.”

Footnotes

[1] SEED defines public companies as those that traded on a major U.S. exchange as identified by the Center for Research in Security Prices (CRSP) at the time the enforcement action was initiated, or otherwise within the five-year period preceding the initiation. Thus, public companies that traded over-the-counter or only on major non-U.S. exchanges are excluded, as are companies that did not become publicly traded until after the enforcement action was initiated.

Anat Carmy-Wiechman is the Associate Director and a former Wagner Fellow and Giovanni Patti is the Head of Research for the Securities Enforcement Empirical Database (SEED) at the NYU Pollack Center for Law & Business. The full report was first published by the Center.

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