Good afternoon. Thank you to the Program on Corporate Compliance and Enforcement for the opportunity to speak to you all.

As is customary, my remarks are in my official capacity as Acting Director of the SEC’s Division of Enforcement, and do not necessarily reflect the views of the Commission, the Commissioners, or other members of the staff.

As many of you likely saw, the Division of Enforcement released its fiscal year 2024 results earlier today.[1] As the report states, in fiscal year 2024, the SEC filed 583 enforcement actions. 431 of those were standalone enforcement actions, which is about 14 percent fewer than the number of standalone actions the SEC filed the prior fiscal year.

I’ll say just a few quick things about that number.

First, the number alone does not tell the full story of the impact of the work of the Division. I think that anyone looking in good faith at the cumulative work of the Division last year will recognize the incredibly deep and broad investor protection impact of that work, some of which I discussed in a speech last week.[2] And those numbers do not reflect the countless investigations that may not have resulted in an enforcement action for evidentiary or other reasons, or where we declined to pursue an enforcement action, but that shined a spotlight on potentially problematic conduct and caused responsible market participants to cease engaging in it. All of this adds up to protecting innumerable investors and promoting trust in our capital markets.

I’ll also note that we just completed an incredibly productive first month of this fiscal year, in terms of number of enforcement actions filed.

But more importantly, I think, after the Division announced record numbers over the past three years, then-Director Gurbir Grewal and I, as his deputy, frequently stated that we did not expect to continue to announce record numbers every year because we expected behaviors to change, we expected compliance.[3] I think that is part of what we’re seeing.

So today I want to focus on what I think of as two complementary themes that have guided the Enforcement program over the last three-plus years, during the time I served as deputy director and, for the past six weeks or so, as acting director of the Division of Enforcement.

Those themes are (i) robust enforcement of the federal securities laws and (ii) fostering a culture of compliance by market participants.

I say those themes are “complementary” because they’re two sides of us using our pressure points to influence market behavior in support of our investor protection mission.

Those themes are also complementary because there is a direct relationship between the two: robust enforcement fosters a culture of compliance among market participants by reducing the incentive of non-compliance. And, of course, a culture of compliance among market participants reduces the need for robust enforcement.

This dynamic has recently been on stark display.

Sanjay Wadhwa and Joseph Facciponti (©Hollenshead: Courtesy of NYU Photo Bureau)

After Gurbir and I assumed leadership of this Division in the summer of 2021, we spoke frequently of the need to recalibrate penalties to a level where they are adequate to fulfill their dual purpose of holding actors accountable and deterring violations; to where they’re not seen as just an acceptable cost of doing business.[4]

It wasn’t just talk. We recommended enforcement actions resulting in Commission orders for record penalties over the past several years.[5]

But at the same time, we messaged that we were prepared to work with parties that worked with us. We made it clear at conference after conference that, while we would seek robust penalties when necessary to achieve accountability and deterrence, parties that self-policed, self-reported, remediated, or otherwise cooperated with the Division’s investigations may receive reduced civil penalties or even no penalties at all. That is because of the incredibly powerful and positive investor protection effect there is when market participants step up, take responsibility for their conduct, and work to remediate the problematic conduct at issue. It increases investor trust and promotes market integrity; it helps maintain fair, orderly, and efficient markets; and it helps facilitate capital formation.

So, of course, we want to encourage and incentivize that behavior.

Our efforts have paid off. As market participants received those twin messages – robust penalties on one hand, benefits for cooperation on the other – and saw that we were serious, more and more market participants heeded our call by self-reporting, remediating, and taking other proactive steps to move our investigations more efficiently that we would have otherwise.

Of course, much has been written and said about the robust penalties in the off-channel communications cases, and those have certainly resulted in numerous firms coming forward to self-report and proactively remediate.[6] But this is not limited to those cases. On the contrary, we have seen parties coming forward in all kinds of cases, including matters involving material misstatements,[7] fraud,[8] controls failures related to cybersecurity[9], failures to disclosure securities holdings,[10] and more.

This illustrates that robust enforcement is good for markets because it fosters a culture of compliance among market participants and promotes investor confidence.

The corollary is that practicing a culture of compliance, including self-reporting, remediation, and affording Enforcement staff meaningful cooperation during an investigation, is the best way to position yourself when it comes to seeking reduced or zero penalties, and as I’ve publicly noted, the Division of Enforcement has been very responsive on this front.[11]

It also shows, I hope, that civil penalties are a tool that we have employed very deliberately to protect investors. If civil penalties were necessary to hold actors accountable and ensure that market participants adequately invest in their compliance function, then we have sought them. But where seeking reduced or even no penalties better served our investor protection mission by rewarding positive behavior and messaging those benefits to others, then we have done that.

Sanjay Wadhwa and Joseph Facciponti (©Hollenshead: Courtesy of NYU Photo Bureau)

I am very pleased that many market participants have in fact stepped up their compliance functions to embrace our shared mission of protecting investors, and have in return received benefits from the Commission for doing that.

I hope we can continue to build on that effort going forward.

Thank you.

Footnotes