The Securities and Enforcement Commission’s Division of Enforcement release its 2019 Annual Report highlighting the 862 actions and $4.3 billion in disgorgement and penalties.
The report emphasized actions against individuals. Excluding the Share Class Initiative cases, 69% of the standalone cases were against individuals. This is in line with cases filed during the past few years. Included in this individual accountability is the suspension or barring of nearly 600 people from the securities industry.
Actions against investment advisers and investment companies in FY 2019 nearly doubled from the year before. That sounds ominous. But this increase includes 95 settlements that resulted from self-reports in the SEC’s Share Class Selection Disclosure initiative. Removing those cases, removes the over-allocation of cases to advisers.
For FY2019, the Division had __ ares of focus:
- Retail investor protection, the most vulnerable to bad actors in the industry.
- Cyber-related misconduct – hacking and ICO failures
- Unlawful trading – new SEC tech to spot problems.
The Report highlights some of the Division’s difficulties.
The Kokesh case made it clear that the SEC’s power to impose penalties and disgorgement is subject to a five-year statute of limitations. The Report estimates that this has resulted in the SEC foregoing over $1 billion in disgorgement.
The SEC had been subject to a two-year hiring freeze, which was lifted in the Spring of 2019. The freeze is effectively a reduction in size because personnel leaving for retirements and departures can not be filed.
Sources:
- SEC’s Division of Enforcement 2019 Annual Report
- SEC highlights enforcement actions involving advisers and brokers
- Headwinds and Shifting Priorities: Beyond the Numbers in the SEC Enforcement Division’s 2019 Annual Report
- SEC Enforcement Division Reports on FY 2019
- Snapshot of a Cleaner Street: Another Landmark Year for Securities Enforcement
