The US Securities and Exchange Commission (SEC) cites the use of new data analytics in its continued increase in enforcement actions for the fiscal year that ended in September, which also set a new single-year high in specific categories.
In its Oct. 11 announcement, the SEC indicated that it filed 868 enforcement actions and obtained orders of more than $4 billion in disgorgement and penalties in FY 2016. That was a 7 percent increase from last year’s 807 actions and a 13 percent increase over 2014’s 755.
The new high for specific enforcement actions included the most ever filed against investment advisors or companies (160) and independent or stand-alone cases involving them (98). The commission also hit a single-year high for actions related to the Foreign Corrupt Practices Act (21) and monetary distributions to whistleblowers ($57 million). The 548 stand-alone or independent enforcement actions also set a record.
“By every measure, the enforcement program continues to be a resounding success holding executives, companies, and market participants accountable for their illegal actions,” SEC Chair Mary Jo White said in a prepared statement. “Over the last three years, we have changed the way we do business on the enforcement front by using new data analytics to uncover fraud, enhancing our ability to litigate tough cases, and expanding the playbook bringing novel and significant actions to better protect investors and our markets.”
Andrew Ceresney, director of the SEC Enforcement Division, noted “groundbreaking” insider trading and Foreign Corrupt Practices Act cases “and other important actions across the full spectrum of the securities laws” among the year’s accomplishments.
Indeed, the commission cited the following five cases as among its most significant enforcement actions:
- Insider trading and beneficial ownership reporting-related charges against Leon G. Cooperman and his firm, Omega Advisors.
- Insider trading charges against William “Billy” Walters and his source, Thomas C. Davis, a former Dean Foods Co. board member.
- A $415 million enforcement action against Merrill Lynch for violating customer protection rules by misusing customer cash and putting customer securities at risk. The firm also admitted wrongdoing.
- A $267 million enforcement action against J.P. Morgan wealth management subsidiaries for failing to disclose conflicts of interest to clients. The firms also admitted wrongdoing.
- Foreign Corrupt Practices Act cases against the Och-Ziff hedge fund and its CEO and CFO, and against VimpelCom Ltd., in which the companies paid hundreds of millions of dollars to settle the charges.
The commission noted 10 categories of financial misconduct in its work this year:
- Financial fraud and issuer disclosures.
- Gatekeepers’ failure to meet professional standards.
- Unfair or risky operations by market participants.
- Insider trading schemes.
- Investment advisors’ and companies’ misconduct.
- Market manipulation and microcap fraud.
- International and affinity-based investment frauds.
- Failure to disclose and other violations in public finance markets.
- Misconduct in complex financial instruments.
- Foreign corrupt practices.
Links to specific cases in each of the 10 categories are included in the announcement.
The SEC also noted its support of whistleblowers, victory in nine court cases, and obtaining acknowledgements of wrongdoing under the admissions policy.
About Terry Sheridan
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.