SEC Enforcement Actions against Public Companies Rebound in 2H FY 2018

Reversing a downward trend, 55 new actions were filed in the second half of the fiscal year

New York (December 11, 2018) — 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 FY 2018, according to a report released today by the NYU Pollack Center for Law & Business and Cornerstone Research.

The report, SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2018 Update, analyzes data from the Securities Enforcement Empirical Database (SEED). The SEED data shows that 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 2H FY 2017 and continued into the first half of FY 2018.

“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,” commented Stephen Choi, the Murray and Kathleen Bring Professor of Law 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.”

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.

“Despite the lower level of activity in 1H FY 2018, the record number of cases filed in 2H FY 2018 brought overall enforcement activity broadly in line with recent trends,” commented David Marcus, senior vice president of Cornerstone Research. “If we look at the total number of actions filed in FY 2018, it was a 9 percent increase over the previous fiscal year.”

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.

Highlights

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.

About the Securities Enforcement Empirical Database (SEED)

The Securities Enforcement Empirical Database (SEED) tracks and records information for SEC enforcement actions filed against public companies and their subsidiaries. SEED also includes information on individuals who are named defendants in these actions. Created by the NYU Pollack Center for Law & Business in collaboration with Cornerstone Research, SEED facilitates the analysis and reporting of SEC enforcement actions through regular updates of new filings and settlement information for ongoing enforcement actions.

About the NYU Pollack Center for Law & Business

Established in 1997, the NYU Pollack Center for Law & Business is a joint venture of the NYU School of Law and the Stern School of Business. Its mission is to enrich the teaching curriculum at both schools in areas where law and business intersect; to facilitate professional interaction and academic research by faculty who share an interest in the structure, regulation, and function of the market economy; and to contribute to the public welfare by supporting scholarship that assists governmental and private policymakers in their pursuit of enhanced business productivity.

About Cornerstone Research

Cornerstone Research provides economic and financial consulting and expert testimony in all phases of complex litigation and regulatory proceedings. The firm works with an extensive network of prominent faculty and industry practitioners to identify the best-qualified expert for each assignment. Cornerstone Research has earned a reputation for consistent high quality and effectiveness by delivering rigorous, state-of-the-art analysis for over 25 years. Named one of the Best Workplaces by Inc. Magazine, the firm has 700 staff and offices in Boston, Chicago, London, Los Angeles, New York, San Francisco, Silicon Valley, and Washington.

Please visit Cornerstone Research’s website for more information about the firm’s capabilities in economic and financial consulting and expert testimony.