RIA Compliance Blog
The SEC has released the results of the 686 2013 enforcement actions it filed in federal court, which resulted in $3.4 billion in sanctions against offenders. Of the $3.4 billion, securities violators were required to disgorge illegal profits of approximately $2.257 billion and pay penalties of approximately $1.167 billion. The chairperson of the SEC, Mary Jo White, stated, “A strong enforcement program helps produce financial markets that operate with integrity and transparency, and reassures investors that they can invest with confidence.”
The 2013 total sanction amount is 10 percent higher than 2012 and 22 percent higher than 2011. In 2013, the SEC pursued many categories of enforcement actions including:
– Broker-dealers (121)
– Delinquent Filings (132)
– Foreign Corrupt Practices Act (5)
– Financial Fraud/Issuer Disclosure (68)
– Insider Trading (44)
– Investment Adviser/Investment Co. (140)
– Market Manipulation (50)
– Securities Offering (103)
– Other (23)
The SEC highlighted certain enforcement programs on which they had focused in 2013 and programs that they will emphasize for the foreseeable future. The SEC is focused on making sure gatekeepers, people that have special duties to ensure that the interests of investors are protected, safeguard and protect investors’ rights.
The SEC is also focused on insider trading. The SEC commenced enforcement actions against 44 different entities for insider trading, including an action against S.A.C. Capital Advisors for failing to supervise employees and prevent insider trading.
Additionally, the SEC is focused on enforcement actions against suspect behavior that stemmed from the financial crisis from June of 2008 through the present. The SEC has filed enforcement actions against 169 different individuals and entities relating to the financial crisis. An example of an enforcement action was one filed against Wells Fargo, which allegedly sold investments that were tied to mortgage-backed securities without divulging the risks to its clients. Wells Fargo paid over $6.5 million to settle the case.
The last major highlighted enforcement program for the SEC in 2013 is focused on the municipal securities market. The SEC recently increased its attention to violations by different municipalities and other governmental issuers. The aim for the SEC under this enforcement program is to protect investors and maintain fair, orderly, and efficient markets.
In addition to the enforcement programs mentioned above, the SEC has signaled the following forward looking initiatives on which they will focus their efforts in 2014:
- New Task Forces – The SEC created a new Microcap Task Force which has been allocated additional resources and expertise to target fraud in microcap markets and target gatekeepers.
- Consolidated Short Selling Charges – The SEC will conduct streamlined investigations to crackdown on violators of Rule 105 of Regulation M, regarding short sales.
- Improvements in Technology – the SEC enforcement division improved its capabilities for forensics analysis and reviewing high volumes of documents.
Given the increased initiatives of enforcement employed by the SEC, it is important to have attorneys that can assist you with this complex area. Parker MacIntyre provides legal and compliance services to investment advisers, broker-dealers, registered representatives, hedge funds and issuers of securities, among others. Our regulatory practice group assists financial service providers with the complex issues that arise in the course of their businesses, including compliance with federal and state laws and rules.