SEC Touts Gains in Enforcement Actions in 2023

As we prepare to flip the calendar to 2024, the tidal wave of announcements from federal agencies celebrating their yearly accomplishments has already started.

The annual inundation of statistics often feels like a competition to see which agency’s staff can do the best job of accentuating the positive. This year’s submission from the Securities and Exchange Commission includes enforcement numbers intended to emphasize its renewed sense of urgency as the cop on the financial beat. Always a hit with the judges.

Let’s run down some of the top highlights from the SEC’s enforcement results for the 2023 fiscal year.

Enforcement actions… Up

The SEC filed almost 800 enforcement actions in 2023, an increase of 3% from 2022. They included roughly 500 stand-alone actions, up 8% from the previous 12 months. The agency also filed 162 follow-on administrative proceedings, which attempt to prevent individuals from taking on certain roles in the securities market. The SEC pointed out that its stand-alone enforcement actions ran the gamut of financial hanky-panky – ranging from garden-variety fraud to crypto scams.

“The breadth and complexity of the issues addressed in our actions filed last year demonstrate the staff’s unwavering resolve, including when confronted by well-heeled adversaries, to doggedly pursue bad actors in every corner of the securities industry and hold them accountable for their transgressions,” said Sanjay Wadhwa, deputy director of the SEC Division of Enforcement.

Additionally, the Commission obtained orders banning more than 130 individuals from being named as officers or directors of publicly listed companies. SEC Enforcement Director Gurbir Grewal announced in 2021 that the federal government would look to bar some individuals charged with securities violations from holding such positions.

Financial remedies… Down

The commission obtained orders in 2023 for almost $5 billion. Although the amount declined about 30% from last year’s record-setting haul of $6.4 billion, it still represented the second-highest total in remedies ever. The 2023 total included $3.4 billion in disgorgement and prejudgment interest and $1.6 billion in civil penalties.

The commission did call attention to what it termed “robust financial remedies against major companies” levied in 2023. They included combined penalties greater than $400 million against financial firms such as Wells Fargo and HSBC for violating recordkeeping requirements.

The SEC also put a spotlight on the $930 million it distributed over the course of the year to investors who had been harmed. That makes two years in a row it has doled out more than $900 million.

Hot-button issues

The enforcement report drills down on some actions related to financial topics currently dominating the headlines. For example, the agency chose to highlight charges against issuers for making misleading disclosures related to cybersecurity risks. It also described a “highly productive and impactful year for the SEC’s enforcement efforts relating to crypto asset securities.” They included charging prominent influencers such as reality TV star Kim Kardashian and actress Lindsay Lohan for hawking crypto securities without disclosing they were being compensated for doing so.

With the SEC looking to take a more active role in enforcement efforts related to environmental, social and governance matters, the report touches on some ESG-centric actions from 2023. In the future, that type of enforcement will undoubtedly draw more scrutiny from both proponents and detractors of the SEC’s policing of corporate ESG.

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