Articles Tagged with securities enforcement

The current ongoing federal government shutdown adversely affects the Securities and Exchange Commission with a “very limited number of staff members available” to carry out the agency’s tasks. The SEC handles the enforcement of federal securities laws through overseeing approximately $90 trillion in annual securities trading as well as the activities of over 27,0000 registered entities and self-regulatory organizations. The SEC’s Division of Enforcement investigates into potential securities laws or regulatory violations and recommends any required action against perpetrators. Now, the SEC is reportedly operating at 5.8% and the enforcement division at 8% of capacity. In fact, the Division will take months after the shutdown ends to recover, according to the SEC’s Office of Internet Enforcement’s chief, John Stark. The constraints posed by the government shutdown come after the SEC’s outstanding enforcement and accomplishments in 2018, posted in their second annual report.

Starting with the first 2017 report, the Division assesses the performance of their fiscal year with five core principles in mind. These Division of Enforcement’s five principles are a focus on the Main Street Investor; individual accountability; keep pace with technological change; impose remedies that most effectively further enforcement goals; and continuously assess the allocation of resources. Based on their assessment, SEC’s codirectors Stephanie Avakin and Steven Peikin described the Division of Enforcement’s efforts this year as a “great success”. In evaluating their effectiveness, the Division’s assessment focuses more on the “nature, quality, and effects” of their enforcement actions, rather than just the quantitative metrics.

Nonetheless, the Division did accomplish impressive numeric feats as well despite the constraints of a hiring freeze and the Supreme Court’s 2017 decision in Kovesh v. SEC. The Division has investigated and recommended hundreds of cases alleging misconduct, leading to $794 million returned to harmed investors. Compared to the prior year, the SEC filed more enforcement actions (821) with higher numbers for stand alones (490), follow-on admin proceedings (210) and delinquent filings (121) in 2018.  The most common stand-alone enforcement actions involved securities offerings, investment advisors, and issuer reporting as well as disclosure. Despite Kovesh v. SEC limiting the window of time for collecting, the SEC ordered around $2.5 million in disgorgement and another $1.5 million in penalties.