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The Securities and Exchange Commission will continue to aggressively pursue actions against individuals, as it is “critical” to the agency’s enforcement program and “more effectively deters wrongdoing,” the agency’s enforcement division co-directors say.
Stephanie Avakian and Steven Peiken, SEC enforcement division, state in their just-released annual report that they agree with SEC Chairman Jay Clayton’s view that “vigorous pursuit of individual wrongdoers must be the key feature of any effective enforcement program.”
Since Clayton took office, the SEC has charged an individual in more than 80% of standalone enforcement actions. The report notes that “this focus on individuals consumes more of our limited resources; with more to lose, individuals are more likely to litigate with the Commission. But that price is worth paying.”
The Commission, the co-directors wrote, “has long pursued misconduct by both institutions and individuals. And it will continue to do so. But common sense and experience teach that individual accountability more effectively deters wrongdoing.”
That pursuit of individuals “will send strong messages of both general and specific deterrence and strip wrongdoers of their ill-gotten gains. In many instances, we must also seek to protect investors by barring serious wrongdoers and recidivists from our markets.”
In fiscal 2017, 73% of the Commission’s standalone actions involved charges against one or more individuals, the same percentage as in FY 2016 (excluding the 84 actions attributable to the MCDC Initiative targeting municipal bond issuers).
In total, the Commission brought 754 actions and obtained judgments and orders totaling more than $3.7 billion in disgorgement and penalties.
The report notes a modest decrease in filed enforcement actions and recoveries since 2016: 754 vs. 784 cases (excluding municipal cases) and $3.8 billion vs. $4 billion in total money ordered.
The agency also returned “a record” $1.07 billion to harmed investors, suspended trading in the securities of 309 companies, and barred or suspended more than 625 individuals, the report states.
“While such statistics provide some kind of measurement, they provide a limited picture of the quality, nature and effectiveness of our efforts,” Avakian and Peikin said.
The report breaks down the “diverse mix” of 754 enforcement actions, as follows:
• 446 were “standalone” actions brought in federal court or as administrative proceedings;
• 196 were “follow-on” proceedings seeking bars based on the outcome of Commission actions or actions by criminal authorities or other regulators; and
• 112 were proceedings to deregister public companies — typically microcap — that were delinquent in their Commission filings.
— Related on ThinkAdvisor:
FINRAs board “has public board members who have very deep ties to the securities industry,” said the lawyers’ trade group.
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