RIA Compliance Blog
Last month at the Annual Conference of the Securities and Exchange Commission (“SEC”), the Commission revealed its enforcement statistics for 2014, including a record number of enforcement actions (755) and monetary relief obtained ($4.1 Million). The Commission also announced its current initiatives including a continued emphasis in the use of data analytics in both regulation and enforcement investigations. Among the areas of emphasis highlighted at this year’s conference were insider trading, financial reporting and auditing cases, inadequate internal controls for public companies, enhanced scrutiny of auditors and other reporting gatekeepers, and Foreign Corrupt Practices Act enforcement.
In addition, 30 trials were conducted in 2014 by the Commission, the most trials in over a decade. By contrast, the Commission tried only 6 cases in 2013. Two-thirds of the trials were in federal court, while one-third were before Administrative Law Judges.
Enforcement staff spent considerable time providing commentary on the Second Circuit’s decision in U.S. v. Newman, previously discussed in our blogs. That decision vacated convictions for insider trading and is expected to have significant impact on the SEC’s enforcement of insider trading cases. The case is perceived to considerably alter the standard for finding liability by both tippers and tippees in insider trading cases, although the staff indicated that most of its current cases are unaffected by the decision.
The regional director of the SEC’s Fort Worth Regional Office, who is Chairman of the FRAud Task Force, together with Margaret McGuire, who is senior counsel to the Director and Vice Chairman of the FRAud Task Force, highlighted the use of issuer monitoring and Internal Control over Financial Reporting (ICFR) as two of the FRAud Task Force’s major initiatives. The task force is using both internal and external data to review and monitor potential areas that warrant investigation of issuers. For example, during the recent period the task force identified over 200 issuers in various market sectors with varying accounting practices that warrant further investigation.
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