SEC Fiscal Year Reports A Record Number -- Enforcement Actions
The Securities and Exchange Commission (SEC) recently announced a year-end report stating that it has filed the largest number of enforcement actions in its 2011 fiscal year. The agency says the record number of enforcement actions -- 735 -- included a wide range of matters such as those involving market practices, insider trading, complex products and transactions.
A strongly worded announcement made it clear that the SEC believes it has strengthened its enforcement work after a reorganization that occurred in 2009 and 2010. Referring to the financial crisis and its repercussions, SEC Chairman Mary L. Schapiro noted the agency's " 'unmatched record of holding wrongdoers accountable and returning money to harmed investors.' "
The SEC's announcement comes at the end of the first year of enforcement since the reforms were put in place. The $2.8 billion in penalties and discouragements in the 2011 Fiscal Year are the highest in the agency's history.
Robert Khuzami, Director of the SEC's Division of Enforcement described the accomplishment as "remarkable" going on to point out the " 'talent, grit, and determination of the staff, as well as their creativity and willingness to consider new tools and approaches to stopping and deterring fraud and misconduct.' "
The statistics cited by the agency include actions involving C Suite members and senior corporate officers, individuals and firms involved in failed CDO offerings. Others involved related matters concerning subprime mortgage securities and related funds. The insider trading cases rose as well this past year. These cases targeted hedge fund managers and traders, as well as other individuals with access to do significant damage to firms, markets and investors.
Other matters included financial fraud and issuer disclosure violations, which once were the standard fare for the agency prior to the financial crisis. Overstating results and audit failures were the basis for some of these actions. In addition, there were notable cases brought against firms and individuals involved in allegedly fraudulent schemes that targeted vulnerable populations such as the elderly and the deaf, in an on-line solicitation.
Another major area of enforcement were actions against investment advisers and broker-dealers which included 146 enforcement actions which represents a 30 percent increase over the prior year. Broker-dealer enforcements were up by 60 percent in the prior year. These matters included allegations of misleading statements on fund performance, analytics tools (investment models) and misuse of client information on the part of firms and individuals.
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