Securities and Exchange Commission enforcement actions against public companies and their subsidiaries continued their downward trend through the first half of the 2018 fiscal year.
SEC enforcement activity is on pace to reach the lowest level since 2013, according to a report by the NYU Pollack Center for Law & Business and Cornerstone Research.
The report, SEC Enforcement Activity: Public Companies and Subsidiaries – Midyear FY 2018 Update, analyzes data from the Securities Enforcement Empirical Database (SEED). This is the first of these reports to include data on individuals who are named defendants in public company and subsidiary actions.
In the first half of FY 2018 (ending March 31, 2018), the SEC filed only 15 new enforcement actions against public companies and their subsidiaries – a 67 percent decrease from the 45 filed in the first half of FY 2017. The SEC filed 17 actions against public companies and their subsidiaries in the second half of FY 2017.
“The low rate of SEC actions against public company and subsidiary defendants has continued through the first half of FY 2018. This is the lowest total since the first half of FY 2013,” noted Stephen Choi, the Murray and Kathleen Bring Professor of Law at the NYU School of Law and director of the Pollack Center for Law & Business.
Almost 70 percent of new actions targeted finance, insurance and real estate.
In the first half of FY 2018, 33 percent of the public company and subsidiary actions involved individuals as named defendants. The percentage of all new actions brought as administrative proceedings decreased to 80 percent from 94 percent in second half of FY 2017.
Both total and average monetary settlements were the lowest semiannual amounts in SEED’s dataset. Total monetary settlements declined to $65 million and the average settlement was only $4.3 million in the first half of FY 2018, according to David Marcus, senior vice president and head of Cornerstone Research’s finance practice. “In addition, the largest monetary settlement of $14 million was by far the lowest in any half year,” he said.
Additional findings:
- Of the five new actions with individual defendants in the first half of FY 2018, four involved issuer reporting and disclosure allegations.
- Two public company and subsidiary actions in the first half of FY 2018 included allegations of steering investors to higher fee share classes of mutual funds, examples of the SEC’s announced focus on protecting retail investors.
- In the first half of FY 2018, 87 percent of public company and subsidiary actions were resolved on the same day they were initiated.
- In the first half of FY 2018, 56 percent of public company and subsidiary defendants cooperated with the SEC.
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