SEC Actions Against Public Companies Surged in Second Half

The number of new U.S. Securities and Exchange Commission (SEC) enforcement actions against public companies and subsidiaries jumped substantially in the second half of fiscal year 2018.

According to a report by the NYU Pollack Center for Law & Business and Cornerstone Research, the SEC filed 55 new actions against public companies and subsidiaries in the second half of FY 2018, reversing a decline in filings that began in the second half FY 2017 and continued into the first half of FY 2018.

The data in the report, SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2018 Update, analyzes data from the Securities Enforcement Empirical Database (SEED), show that despite the lower level of activity in the first half of the year, the record number of cases filed in second half 2018 brought overall enforcement activity broadly in line with recent trends.

For all of FY 2018, which ended September 30, the SEC filed a total of 71 new enforcement actions against public companies and subsidiaries, compared to 65 in FY 2017.

Monetary settlements in public company and subsidiary actions totaled over $2.4 billion in FY 2018—more than the total in any fiscal year since at least FY 2010, and an 87 percent increase from FY 2017.

“The SEC made a dramatic comeback in the second half of the 2018 fiscal year, filing a record-setting 55 new enforcement actions against public companies and subsidiaries—the most in any half-year covered by SEED,” said Stephen Choi, professor at the NYU School of Law and director of the Pollack Center for Law & Business. “While we often see end-of-year upticks, the number of actions filed in the second half of fiscal year 2018 was more than triple the number filed in the first half of the year.”

Additional Data

• The last quarter of FY 2018 saw the highest number of public company and subsidiary actions that also named individuals as defendants in a single quarter tracked by SEED.
• The SEC continued to bring the substantial majority (85 percent) of actions against public companies and subsidiaries as administrative proceedings in FY 2018. In contrast, the majority (55 percent) of actions without public companies or subsidiaries were filed as civil actions in FY 2018.
• Almost half (45 percent) of public company and subsidiary actions involved Broker Dealer or Investment Advisor/Investment Company allegations. This is consistent with the SEC’s focus on retail investors and the launch of its Retail Strategy Task Force at the end of FY 2017.
• More than half (61 percent) of public company and subsidiary defendants cooperated with the SEC during the fiscal year. This marked the fourth fiscal year in a row in which more than half of public company and subsidiary settlements noted some form of cooperation.
• The SEC imposed monetary penalties in nearly all (89 percent) of its FY 2018 settlements with public companies and subsidiaries. This percentage is consistent with the FY 2010–FY 2017 average of 84 percent.