(Article from Registered Funds Regulatory Update, January 2024)
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On November 14, 2023, the SEC announced its enforcement results for fiscal year 2023. Over the year, the SEC filed 784 total enforcement actions, up from the 760 actions filed in the 2022 fiscal year. Penalties, disgorgement, and pre-judgment interest amounted to $4.949 billion, the second highest amount in SEC history, down from $6.439 billion in the previous year. The SEC also obtained orders barring 133 individuals from serving as officers and directors of public companies, the highest number of officer and director bars obtained in a decade.
The SEC also issued whistleblower awards totaling nearly $600 million, the most ever awarded in a single year, including a record-breaking $279 million awarded to one whistleblower. The SEC received over 18,000 whistleblower tips in fiscal year 2023, a record number exceeding more than 50 percent of the number of whistleblower tips received in fiscal year 2022. The SEC also reported it received more than 40,000 tips, complaints, and referrals in total, an increase of 13 percent compared to fiscal year 2022. It also distributed $930 million to harmed investors, marking the second year in a row the SEC distributed over $900 million.
The SEC issued enforcement actions against a wide variety of market participants, including broker-dealers, credit rating agencies, investment advisers, gatekeepers, and individuals. Notably, the SEC focused on compliance in the evolving crypto, cybersecurity, and ESG spaces, including charges against crypto companies Binance and Coinbase for noncompliance in the crypto asset intermediary space, Virtu for materially false and misleading statements and omissions regarding information barriers to prevent the misuse of sensitive customer information, and Goldman Sachs for ESG-related violations. Some of the year’s largest penalties, totaling $400 million, were issued as a result of the SEC’s actions against twenty-five advisory firms, broker-dealers, and/or credit rating agencies, including Wells Fargo, HSBC, and Scotia Capital, for widespread and longstanding failures to maintain and preserve work-related communications on employees’ personal devices. In addition, the SEC charged ten investment advisers for noncompliance with the new Marketing Rule under the Advisers Act. The SEC also issued several enforcement actions for failing to protect whistleblowers’ rights and the ability to report potential securities laws violations to the SEC.
Notably, the SEC consistently recognized meaningful cooperation with the agency to promote compliance across the securities industry, which it emphasized encourages firms to, among other things, proactively self-police, self-report, and remediate violations. The SEC rewarded public issuers, private companies, and advisers in connection with a range of violations, including material misstatement, recordkeeping, and whistleblowing violations.
SEC Announces Enforcement Results for Fiscal Year 2023, SEC Press Release (Nov. 14, 2023), available at: https://www.sec.gov/news/press-release/2023-234.