Research Highlights
SEC Ramps Up Enforcement against Public Companies and Subsidiaries in FY 2022
—
The number of defendants that settled in FY 2022 with admissions of guilt increased substantially from the previous fiscal year.
The SEC imposed $2.8 billion in monetary settlements, the largest total in any fiscal year recorded in the Securities Enforcement Empirical Database.
The U.S. Securities and Exchange Commission (SEC) filed 68 enforcement actions against public companies and subsidiaries in the first full fiscal year of Chair Gary Gensler’s tenure. Monetary settlements imposed in public company or subsidiary actions reached $2.8 billion, according to a report released today by the NYU Pollack Center for Law & Business and Cornerstone Research.
The report, SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2022 Update, analyzes information from the Securities Enforcement Empirical Database (SEED). The 68 enforcement actions in FY 2022, which ended September 30, reflected a 28% increase from the previous fiscal year.
The SEC imposed monetary settlements on 97% of the 75 public company and subsidiary defendants that settled in FY 2022. Both the dollar amount and the percentage were the largest of any fiscal year recorded in SEED, which covers actions beginning in FY 2010.
“The number of defendants that settled in FY 2022 with admissions of guilt increased substantially from the previous fiscal year. This was driven by actions involving Broker Dealer allegations brought by the SEC in September,” said Stephen Choi, the Bernard Petrie Professor of Law and Business at New York University School of Law and director of the Pollack Center for Law & Business. “The 16 defendants admitting guilt was double the largest number in any previous fiscal year in SEED.”
The $2.8 billion in monetary settlements imposed in public company or subsidiary enforcement actions in FY 2022 was $921 million more than in FY 2021 and $321 million more than in any other fiscal year in SEED. The median monetary settlement in FY 2022 was $9 million, the largest in SEED. The average settlement was $42 million.
“The increase in monetary settlements is consistent with the SEC’s public statements that ‘robust remedies’ are an enforcement priority,” said report coauthor Sara Gilley, a Cornerstone Research vice president. “The $1.2 billion in monetary settlements with 16 public broker-dealer subsidiaries for recordkeeping failures represents 44% of total monetary settlements in the fiscal year.”
Issuer Reporting and Disclosure continued to be the most common allegation type in FY 2022, accounting for 38% of actions. Allegations in the SEC’s Broker Dealer classification were the second most common for the first time since FY 2018. Nearly 70% of the 16 Broker Dealer actions were filed against financial institutions for recordkeeping failures.
Additional Highlights:
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.
The report, SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2022 Update, analyzes information from the Securities Enforcement Empirical Database (SEED). The 68 enforcement actions in FY 2022, which ended September 30, reflected a 28% increase from the previous fiscal year.
The SEC imposed monetary settlements on 97% of the 75 public company and subsidiary defendants that settled in FY 2022. Both the dollar amount and the percentage were the largest of any fiscal year recorded in SEED, which covers actions beginning in FY 2010.
“The number of defendants that settled in FY 2022 with admissions of guilt increased substantially from the previous fiscal year. This was driven by actions involving Broker Dealer allegations brought by the SEC in September,” said Stephen Choi, the Bernard Petrie Professor of Law and Business at New York University School of Law and director of the Pollack Center for Law & Business. “The 16 defendants admitting guilt was double the largest number in any previous fiscal year in SEED.”
The $2.8 billion in monetary settlements imposed in public company or subsidiary enforcement actions in FY 2022 was $921 million more than in FY 2021 and $321 million more than in any other fiscal year in SEED. The median monetary settlement in FY 2022 was $9 million, the largest in SEED. The average settlement was $42 million.
“The increase in monetary settlements is consistent with the SEC’s public statements that ‘robust remedies’ are an enforcement priority,” said report coauthor Sara Gilley, a Cornerstone Research vice president. “The $1.2 billion in monetary settlements with 16 public broker-dealer subsidiaries for recordkeeping failures represents 44% of total monetary settlements in the fiscal year.”
Issuer Reporting and Disclosure continued to be the most common allegation type in FY 2022, accounting for 38% of actions. Allegations in the SEC’s Broker Dealer classification were the second most common for the first time since FY 2018. Nearly 70% of the 16 Broker Dealer actions were filed against financial institutions for recordkeeping failures.
Additional Highlights:
- Despite ongoing challenges to the constitutionality of the SEC’s use of administrative law judges, the SEC continued to bring most of its actions (88%) as administrative proceedings in FY 2022.
- Five actions were litigated actions, more than the average of three over the prior five fiscal years and consistent with Chair Gensler’s statement that more cases will be litigated as the SEC increasingly holds wrongdoers accountable.
- The SEC filed four actions against public companies and subsidiaries related to environmental, social, and governance issues.
- In FY 2022, 18% of total monetary settlements came from disgorgement and prejudgment interest, the lowest percentage in SEED. The remaining 82% came from civil and other penalties.
- Only 1% of public company and subsidiary defendants settled without cooperation noted and without a monetary component, the lowest percentage in any fiscal year in SEED.
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.