On November 6, 2019, the Division of Enforcement of the US Securities and Exchange Commission published its annual report for fiscal year 2019. The Report presented the Division’s significant initiatives and actions for the 2019 fiscal year.
The Report noted that in fiscal year 2019, the SEC had brought 862 enforcement actions across a broad range of subject matters, including issuer disclosure/accounting violations; auditor misconduct; investment advisory issues; securities offerings; market manipulation; insider trading; FCPA violations; and broker-dealer misconduct. Through these actions, the SEC obtained judgments and orders totaling more than $4.3 billion in disgorgement and penalties.
Specific to the FCPA, the SEC brought 18 actions against 15 entities and five individuals, resulting in $515 million in civil monetary relief. These included resolutions against companies for bribery, internal controls and recordkeeping failures in jurisdictions across the globe.
The Report also highlighted certain continuing areas of focus for the SEC in fiscal year 2019. First, the SEC continued to focus on coordinating with other law enforcement agencies, including over 400 investigations in which the SEC collaborated with overseas law enforcement, the US Department of Justice, and/or state and local authorities. Second, the SEC continues to emphasize accelerating the pace of its investigations, and the Report states that in 2019 on average just under 24 months elapsed between case opening and filing of an enforcement action, which represents a slight improvement on prior years. Third, the SEC noted that it recognizes the importance of providing greater transparency into how it weighs cooperation credit, and that it has and will continue to work on better communicating this to the public. Fourth, the Report noted that, since its enactment in 2011, the SEC’s whistleblower program has resulted in over $2 billion in financial remedies, and has seen 66 whistleblowers awarded approximately $387 million. This continued in 2019, as the SEC received thousands of whistleblower tips and a record number of whistleblower claims.
Finally, although the SEC obtained over $3.2 billion in disgorgement of ill-gotten gains in fiscal year 2019, the Report cited the Supreme Court’s decision in Kokesh v. SEC, 137 S. Ct. 1635 (2017)—in which the Supreme Court held that the SEC’s claims for disgorgement are subject to a five-year statute of limitations—as a significant impediment to the SEC. The Report states that because many securities frauds are complex and well-concealed, they may not be uncovered until many years after investors were victimized. The SEC “estimates” that it has foregone recovery of approximately $1.1 billion dollars in disgorgement as a result of Kokesh in filed cases, but that the actual impact of Kokesh is significantly larger because the SEC has also shifted its resources to investigations that are most likely to return funds to investors.