Total enforcement actions at the SEC declined in fiscal year 2020 from the prior year, due in part to a sizable drop in the number of stand-alone cases concerning investment advisory and/or company issues, according to the Division of Enforcement’s annual report for FY2020.
The report also detailed how the enforcement division responded to the COVID-19 crisis, noting that the division had opened more than 150 COVID-related inquiries and investigations, and forwarded several fraud actions related to the virus to the SEC. Chairman Jay Clayton said the report highlighted the Enforcement Division’s work during a particularly tumultuous period.
“In addition to discussing the core types of cases brought by the commission, the report shows how Enforcement took action at the onset of the global pandemic against wrongdoers who sought to take advantage of the uncertainty and volatility in the markets,” he said.
In total, the SEC brought 715 enforcement actions in FY2020, a 17% drop from FY2019; the report noted that 492 of these cases were brought after SEC staff began working remotely in mid-March. Four hundred and none of these cases were “stand-alone” actions, brought in federal court or administrative proceedings. Of the stand-alone actions, 32% pertained to securities offerings and 10% concerned actions related to broker/dealers. Cases involving investment advisory and investment company issues dropped from 191 to 87 cases in the two years.
Whistleblower recipients and awards both reached their highest level ever this fiscal year, with the SEC issuing awards to 39 unnamed whistleblowers totaling about $175 million. The tips resulted in more than $2.5 billion in ordered financial remedies, with the SEC saying that almost $750 million already has been, or is scheduled to be, returned to investors who were affected. In total, the SEC’s obtained judgments and orders led to about $4.68 billion in disgorgement and penalties, with $600 million returned to investors.
In the report, Stephanie Avakian, the director of the Enforcement Division, stressed that statistics alone can’t tell the entire story of a program’s effectiveness, but they are only part of the full context.
“This was true in Fiscal Year 2019, when the Commission filed a near-record number of enforcement actions despite a near-total cessation of enforcement activity for more than one month that was caused by a lapse in appropriations,” she wrote. “And it remains true this year, as we faced COVID-related challenges and added new enforcement efforts to our existing responsibilities, and obtained significant results in both areas.”
