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SEC Completes Annual Enforcement Push

For many working professionals, the phrase “end of the fiscal year” can really twist the stomach. It’s just another date on the calendar, but when the phrase is uttered, many hear: “time is running out to squeeze in everything you wanted to do this year.” A mad dash ensues.

Patterns in enforcement filings by the Securities and Exchange Commission suggest life at the regulatory agency is not so different. Intelligize combed through its trove of SEC data from recent years and found a clear spike in the announcement of enforcement actions in September, coinciding with the end of the federal government’s fiscal year.

In four of the last five years, the month of September saw yearly highs in the number of announcements of SEC enforcement matters from litigation releases, administrative proceedings, initial opinions of administrative law judges, and Commission opinions (including those on procedural matters). Last month, the SEC made 265 announcements, an increase of roughly 10% from the second-highest monthly total of the fiscal year, 242. The 259 enforcement announcements in September of 2018 represented a 72% increase over the next-highest month in the fiscal year. The lone exception during the five-year period was the 2016 fiscal year, in which the announcements in August (244), topped the September total of 197.

Although the SEC has yet to release its own statistics from the 2019 fiscal year, Steven Peikin, co-director of the Commission’s enforcement arm, has indicated that they should be consistent with previous years.

The latest batch of end-of-the-year enforcement announcements from last month included a sizable number of actions related to corporate disclosures, such as the charges against Japanese auto manufacturer Nissan Motor Co. and the company’s ex-chairman Carlos Ghosn. The SEC settled with another automaker, FCA US LLC, and its parent company, Fiat Chrysler Automobiles N.V., for manipulating reports of vehicle sales in the United States to mislead investors.

Another September SEC announcement involved a $30 million settlement with pharmaceutical company Mylan N.V. for failing to disclose a Department of Justice investigation. According to the Commission, Mylan was overcharging Medicaid for its EpiPen by misclassifying the product as a generic drug, which touched off the DOJ probe.

Accounting firms PwC LLP and RSM US LLP found themselves caught up in the Commission’s September dragnet too, but not for disclosure-related reasons. PwC was tagged for violating auditor independence rules after a firm partner was charged with performing prohibited services during audits. The SEC also charged RSM with violating auditor independence rules related to more than 100 audit reports.

Additionally, the Commission announced charges against multiple companies for violating the Foreign Corrupt Practices Act (FCPA). Those actions came on the heels of SEC Chairman Jay Clayton lambasting other government agencies around the world for failing to get serious about rooting out graft inside their own borders. The announcements included a $6 million settlement with Barclays PLC related to charges the investment bank violated the FCPA when it hired relatives and friends of foreign officials to gain influence over them.

Now that a busy September has come to an end, and the SEC’s fiscal year has closed, issuers and shareholders can take a quick breath, hopeful that the strong tide of enforcement actions is beginning to recede. The respite may be brief.

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