Article
Key highlights from the SEC 2023 enforcement report
April 15, 2024 · Authored by Jennifer O’Leary
On Nov.14th, 2023, the Securities and Exchange Commission (SEC) issued its annual press release regarding the Enforcement Results for Fiscal Year 2023. During the year, the SEC Division of Enforcement (the “Division”) filed 784 enforcement actions. These included 501 new enforcement actions, 162 follow-on administrative proceedings and 121 actions against issuers delinquent in SEC required filings. The total enforcement actions represent a 3% increase in filings and an 8% increase in new enforcement action filings when compared to the prior fiscal year.
The 2023 actions resulted in $4.95 billion in financial remedies, including $3.37 billion in disgorgement and $1.58 billion in civil penalties. These total financial remedies declined from the prior year, yet still represent the second highest amounts in SEC history.
During the year, the SEC distributed $930 million to harmed investors and nearly $600 million in whistleblower awards, with one whistleblower being awarded $279 million. With a total of over 18,000 tips submitted during the year there was a 50% increase from the prior year in whistleblower tips.
Enforcement actions represented various key priorities for the Division to protect investors that include:
The Division utilized tools such as monetary relief, industry shaping initiatives, actions targeting misconduct, actions protecting whistleblowers, and rewarding cooperation to protect investors and promote market integrity.
- Monetary relief imposed robust financial remedies against major companies for various securities law violations such as violations of recordkeeping requirements, bribery schemes, misleading investors, and misleading disclosures during 2023.
- Initiatives this year were organized to investigate recurring or widespread noncompliance in areas such as the Marketing Rule, required SEC forms, and Regulation A.
- SEC actions targeted misconduct relating to recordkeeping requirements and reporting obligations during the year.
- Charges to protect whistleblowers’ rights and ability to report potential law violations were issued this year. Notable charges related to provisions within company employment and separation agreements that violated the whistleblower protection rule.
- To promote compliance, the SEC rewarded cooperation in 2023 in cases against public issuers, private companies, and advisory firms for various matters including material misstatements, recordkeeping violations, disclosure violations, and violations of the whistleblower protection rule.
The Division continues to prioritize individual accountability year after year. SEC actions during the year included 133 orders barring individuals from serving as officers and directors of public companies. This is the highest number of bar orders in 10 years.
In 2023, the Division focused on retail investor protection with notable actions against groups in affinity frauds and Ponzi schemes and by ordering asset freezes to return money to harmed investors and obtain significant financial remedies.
The Division continues to investigate public company records and disclosures for accuracy. Noteworthy charges for misconduct during the year included fraud, accounting misstatements, and deficient controls.
The Division performs investigations on professionals such as accountants and auditors to ensure their responsibilities and obligations are being performed to protect investors. Investigations in 2023 led to charges that included violations in areas such as the auditor independence rules and deficient audits.
Significant violations include insider trading, front-running, and market manipulation. During the year, the Division imposed charges on various individuals such as social media influencers, financial services industry professionals, and public healthcare executives for market abuse actions.
Remains a key priority for the Division. The Division took actions that included cryptocurrency fraud schemes, unregistered offerings, exchanges, intermediaries, and illegal touting in 2023.
The Division focuses on ensuring SEC registrants reasonably disclose material cybersecurity risks and incidents each year for companies that hold sensitive personal information. Penalties were charged to violators identified during the year.
ESG issues remain a priority of the Division as it becomes increasingly important to investors and remains an evolving industry. Notable actions to protect investors in 2023 included charges against misleading statements around controls, policies and procedure failures, and for failure to maintain disclosure controls and procedures regarding employee complaints.
The Division’s significant enforcement actions during the year regarding public finance related to charges against fraud for a multi-year political corruption scheme, failure of required disclosures against broker-dealers, and auditor fraud.
The Division prioritizes identifying misconduct of investment professionals that are entrusted by investors. Notable actions against investment professionals during 2023 were for failure to disclose significant information and conflicts of interest, and for misleading information.
The Division focused on enforcing the FCPA with actions against various companies for reasons such as improper conduct to influence favorable outcomes and bribery.