Nov 26, 2019

SEC’s 2019 cases against publicly traded companies hit decade high

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Reproduced from Cornerstone Research; Chart: Axios Visuals

The number of cases the SEC filed against publicly traded companies hit at least a decade-high this year, according to findings from New York University and Cornerstone Research that analyzed the SEC’s annual report. Total cases initiated by the SEC — against public companies or not — jumped to the highest level since 2016.

Why it matters: Over 50 of the enforcement actions on public company and subsidiaries targeted investment advisers or brokers — a nod to SEC chairman Jay Clayton’s emphasis on protecting the retail investor.

Between the lines: The jump is explained by the agency’s initiative that encouraged financial firms to self-report instances where advisers sold certain fee-paying mutual funds to clients over other funds.

  • In return for self-reporting, those companies will pay a small fee and don’t have to admit wrongdoing.
  • This accounted for actions against 95 companies in total, 26 of them public.

By the numbers: The SEC settled with Mylan, KPMG and Fiat Chrysler this year, among others. The highest dollar figure settlement this year against a publicly traded company came to $147 million.

  • That’s the lowest maximum penalty for a public company in the report’s 10-year history.
  • 72% of public companies that faced enforcement action settled by paying a fine and cooperating with the SEC.
  • 20% paid a fine but didn’t cooperate.

The bottom line: For all enforcement activity, including cases brought against individuals, the SEC took in $4.3 billion in fines and disgorgements (or the return of profits gained illegally), though a single case against a privately held real estate investing firm accounted for $1 billion of that amount.

  • That’s up from $3.9 billion in penalties for 2018.

P.S. Enforcement activity by the Commodity Futures Trading Commission slowed to 63 from last year’s 83 cases, the agency said on Monday.

  • The derivatives regulator collected $1.3 billion in penalties and payments — a 40% jump year-over-year and the fourth highest in CFTC history.

Go deeper: New stock exchange files application with SEC

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