SEC Ratchets Up Enforcement

SEC Ratchets Up Enforcement

But are their numbers reliable?

The Securities and Exchange Commission boosted the number of enforcement cases it brought over the past year by 6.4 percent and increased level of fines and penalties assessed by about 1 percent.

Throughout the regulator’s fiscal year 2015—which ended in September—the SEC brought 807 enforcement cases and collected more than $4.2 billion in fines and restitution. That’s compared to the 755 cases the agency filed in fiscal year 2014 and the $4.16 billion gained through disgorgement and fines.

SEC Chair Mary Jo White attributed the enforcement division’s increased activity to their use of data, quantitative analytics and collaboration with other divisions.

“Vigorous and comprehensive enforcement protects investors and reassures them that our financial markets operate with integrity and transparency, and the Commission continues that enforcement approach by bringing innovative cases holding executives and companies accountable for their wrongdoing sending clear warnings to would-be violators,” Chair White said in a statement.

But a recent study claims the SEC is exaggerating the number of enforcement cases filed and padding the fines it claims to have levied against alleged violators. Emory University law professor Urska Velikonja told Bloomberg last month that the SEC’s statistics through 2014 were inflated in several ways.

Velikonja analyzed 9,679 SEC enforcement actions over 15 years through fiscal 2014 and found that between 23 percent and 34 percent of total enforcement actions the SEC reported filing had already been counted at least once.  When it came to actions filed against broker/dealers, almost 60 percent of the cases involved double counting.

Additionally, Velikonja found that the number of cases brought in September—which is the end of the regulator’s fiscal year—was more than double the average for the other 11 months of the year.

“The SEC is under tremendous pressure from Congress to deliver more cases,” Velikonja said. “They have to ask for more money each year regardless of what’s going on in the economy.”

Velikonja will be submitting her findings in a paper, which is scheduled to be published in the Cornell Law Review next year.

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