The SEC announced its enforcement statistics for fiscal year 2022, which hit new records. According to the press release, during the year the SEC filed a total of 760 enforcement actions, which represents a 9% increase over the previous year. This total included 462 new, or “independent” enforcement actions that “run the gamut of behavior from ‘first of its kind’ actions to cases accusing traditional violations of securities law.” The SEC also recovered a record $6.4 billion in civil penalties, disgorgements and prejudgment interest in SEC actions, a 68% increase from the $3.8 billion in the SEC. last year. Civil penalties, at $4.2 billion, were also the highest on record. The press release stressed that the increased penalties are intended to “deter future misconduct and enhance public accountability.” In a number of cases, the SEC “recalibrated penalties for certain violations, included prophylactic remedies, and required confessions where appropriate” to make “clear that fines were not just a cost of doing business “. According to Enforcement Director Gurbir Grewal, the SEC doesn’t “expect to break these records and set new ones every year because we expect behaviors to change. We expect compliance. Interestingly, disgorgement, at $2.2 billion, was down 6% from last year. As reported by WSJGrewal, speaking at a recent conference, pointed to the fact that the SEC was imposing more penalties than disgorgements, which he said “demonstrated that” the potential consequences of breaking the law are starkly greater than potential rewards.” He added that the SEC has ordered more than twice as many disgorgements as penalties for the five fiscal years before last. “So while disgorgement was down slightly from the previous year… this is the first time that the amount payable in penalties has been double the amount payable in restitution,” he said. is not what it was a few years ago.”
The press release also highlighted the high priority the SEC places on public company disclosures, with enforcement focusing on prosecuting issuers (and their employees) who make materially inaccurate disclosures, as well as auditors. “that violates applicable laws and regulations in connection with such information”. disclosures”. The SEC cited as examples the charges against Boeing and its former CEO for misleading statements issued after the crashes of two 737 MAX planes and the charges against Compass Minerals International.
Additionally, the SEC emphasized the importance of individual liability, noting that in fiscal year 2022, more than two-thirds of the SEC’s standalone enforcement actions involved at least one defendant or individual defendant, including including leaders such as the former CEO of Boeing. . The SEC also pointed to the use of the SOX 304 clawback against several senior public company executives, which required them to “return bonuses and compensation for wrongdoing in their business, even if the executives were not personally accused of wrongdoing”.
The SEC has also pursued several cases related to inadequate cybersecurity and ESG, applying “tested principles regarding materiality, accuracy of disclosed information, and fiduciary duty.” Among the cases this year was a claim against Vale SA, a publicly traded Brazilian mining company (NYSE) and one of the world’s largest iron ore producers.
For fiscal year 2022, the whistleblower awards were the second highest on record, both in the number of people receiving awards (103 awards) and the total dollar amount awarded ($229 million).
According to the press release, the SEC protects whistleblowers by “prosecuting individuals or entities who take action to prevent or retaliate against them for their whistleblowing,” including charges of overly restrictive confidentiality agreements (see , an earlier case, this PubCo post) and for “preventing an employee from contacting the SEC regarding potential misconduct.”
The press release also addressed investigations parallel to criminal law enforcement, court wins, use of the enforcement toolkit (including data analytics), meaningful cooperation, Custodians, Crypto, Private Funds, Regulated Entities, Market Abuse, Complex Products, Abuse of Public Finances, Foreign Corrupt Practices Act and Sanctions, Commitments and Admissions. Attached to the press release is a 20-page addendum that identifies each action during the period.