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SEC Enforcement Actions against Public Companies and Subsidiaries Keep Pace with Last Two Years

Issuer reporting and disclosure remains most frequent allegation type

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We observed the SEC following similar enforcement trends for public company-related defendants in 2016 into the first half of fiscal 2017. —Stephen Choi

The U.S. Securities and Exchange Commission (SEC) brought 44 new enforcement actions against public companies or their subsidiaries (public company–related defendants) in the first half of fiscal year 2017, according to a report released today by the NYU Pollack Center for Law & Business and Cornerstone Research. Issuer Reporting and Disclosure remained the most frequent type of allegation against these defendants.
 
The report, SEC Enforcement Activity: Public Companies and Subsidiaries—Midyear FY 2017 Update, based on data from NYU and Cornerstone Research’s collaboration on the Securities Enforcement Empirical Database (SEED), also tracks the industries of public company–related defendants. The majority of defendants targeted in the first half of FY 2017 were in the Manufacturing and Finance, Insurance, and Real Estate industries. 
 
While the defendant mix returned to the pattern seen in FY 2010 through FY 2014, when more actions were filed against public company defendants than subsidiary defendants, the total number of actions in the first half of FY 2017 was in line with more recent fiscal years.
 
“We observed the SEC following similar enforcement trends for public company-related defendants in 2016 into the first half of fiscal 2017,” said Stephen Choi, the Murray and Kathleen Bring Professor of Law at the NYU School of Law and director of the Pollack Center.
 
In the first half of FY 2017, Issuer Reporting and Disclosure allegations represented 45 percent of enforcement actions against public company–related defendants. The SEC also remained focused on violations involving Investment Advisor/Investment Companies. Unlike last year, there were no actions against Municipal Securities/Public Pensions.
 
“Despite continued court challenges of the SEC administrative forum, the SEC brought 91 percent of its independent actions against public company–related defendants as administrative proceedings in the first half of FY 2017,” said David Marcus, a senior vice president of Cornerstone Research.
 
Highlights
  • From FY 2010 through the first half of FY 2017, the top 10 monetary settlements imposed in public company–related actions totaled over $3.4 billion. Eight of the top 10 settlements involved financial institutions.
  • The largest monetary settlement in the first half of FY 2017 involved allegations related to Investment Advisor/Investment Companies.
  • In the first half of FY 2017, 63 percent of public company–related defendants cooperated with the SEC.
  • The Manufacturing industry accounted for 40 percent of public company–related defendants in the first half of FY 2017. The second most common industry—Finance, Insurance, and Real Estate—accounted for 38 percent.  
About the Securities Enforcement Empirical Database (SEED)
The Securities Enforcement Empirical Database (SEED) tracks information for SEC enforcement actions filed against public companies and their subsidiaries. Created by the NYU Pollack Center for Law & Business in cooperation with Cornerstone Research, SEED facilitates the analysis and reporting of SEC enforcement actions through regular updates of new filings and settlement information for ongoing enforcement actions. A portion of the Securities Enforcement Empirical Database (SEED) is available to the general public, and a more extensive version is available for academic scholars. 

About the NYU Pollack Center for Law & Business
Established in 1997, the NYU Pollack Center for Law & Business is a joint venture of the NYU School of Law and the Stern School of Business. Its mission is to enrich the teaching curriculum at both schools in areas where law and business intersect; to facilitate professional interaction and academic research by faculty who share an interest in the structure, regulation, and function of the market economy; and to contribute to the public welfare by supporting scholarship that assists governmental and private policymakers in their pursuit of enhanced business productivity.
 
About Cornerstone Research
Cornerstone Research provides economic and financial consulting and expert testimony in all phases of complex litigation and regulatory proceedings. The firm works with an extensive network of prominent faculty and industry practitioners to identify the best-qualified expert for each assignment. Cornerstone Research has earned a reputation for consistent high quality and effectiveness by delivering rigorous, state-of-the-art analysis for over 25 years. The firm has 700 staff and offices in Boston, Chicago, London, Los Angeles, New York, San Francisco, Silicon Valley, and Washington.