SEC Enforcement Actions Against Public Companies and Subsidiaries Jump in FY 2023
In FY 2023, 13% of defendants that cooperated settled without monetary penalty. This is more than triple the average rate over FY 2014–FY 2022.
Total monetary value of settlements fell to lowest level in last eight fiscal years.
The U.S. Securities and Exchange Commission (SEC) filed 91 enforcement actions against public companies and subsidiaries in fiscal year 2023, a 34% increase over FY 2022, according to a report released today by the NYU Pollack Center for Law & Business and Cornerstone Research. That increase contrasted with monetary settlements in public company and subsidiary actions, which decreased to $1.3 billion, the lowest total in the last eight fiscal years. This was down more than 50% year-over-year, and 30% lower than the average annual total monetary settlement amount from FY 2014 through FY 2022.
The report, SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2023 Update, analyzes information from the Securities Enforcement Empirical Database (SEED). The 91 actions filed in FY 2023, which ended September 30, were the third highest of any fiscal year in SEED, which has a dataset beginning with FY 2010. The SEC filed more than one-third (31) of those actions in September, the final month of the fiscal year, contributing substantially to the total.
“The increase in actions coincided with above average levels of cooperation and admissions of guilt,” said Stephen Choi, the Bernard Petrie Professor of Law and Business at New York University School of Law and Director of the NYU Pollack Center for Law & Business. “Nearly 70% of public companies and subsidiaries that settled in FY 2023 cooperated with the SEC. The SEC also obtained 16 admissions of guilt, matching last year’s record, all but one of which were obtained from cooperating defendants.”
The average settlement per action for FY 2023 was $15 million, the smallest since FY 2015 and $27 million lower than the FY 2022 average of $42 million. This marked the largest year-over-year dollar decrease in SEED. Only 87% of cooperating defendants had monetary settlements imposed, as compared to 94% of the defendants without cooperation noted.
“While current SEC leadership continues to ‘emphasize robust penalties,’ the agency has acknowledged that it has ‘aggressively rewarded meaningful cooperation,’ which frequently resulted in zero or substantially reduced penalties in FY 2023,” said report coauthor Sara Gilley, a Cornerstone Research vice president. “In FY 2023, 13% of defendants that cooperated settled without monetary penalty. This is more than triple the average rate over FY 2014–FY 2022.”
Issuer Reporting and Disclosure continued to be the most prevalent allegation type in FY 2023, accounting for 45% of all actions filed and more than 1.5 times as many actions as in FY 2022. Broker Dealer allegations remained above the historical average at 19% of actions and were the second most common allegation type, while Investment Adviser/Investment Company allegations declined to 7% of actions.
- Despite a pending Supreme Court challenge to the SEC’s use of administrative law judges, 92% of all actions were brought as administrative proceedings. This was the highest percentage since FY 2019 (93%) and the third highest of any fiscal year in SEED.
- In FY 2023, 69% of public company and subsidiary defendants that settled cooperated with the SEC. This was higher than the FY 2014–FY 2022 average of 61% and the third highest of any fiscal year in SEED.
- In FY 2023, 16 defendants had an admission of guilt, tied with FY 2022 for the highest total in SEED. The majority of these were from actions brought as part of the SEC’s ongoing sweep for recordkeeping failures related to off-channel communications.
About the Securities Enforcement Empirical Database
The Securities Enforcement Empirical Database (SEED) tracks and records information for SEC enforcement actions filed against public companies traded on major U.S. exchanges 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. The variables tracked include defendant names and types, violations, venues, and resolutions.
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.