The Securities and Exchange Commission Releases Its Annual Results

On November 14, 2012, the SEC announced the results of its enforcement program for fiscal year 2012 (“FY12”), and the agency came just one case short of matching its 2011 record-breaking numbers.  The SEC filed 734 enforcement cases, bringing the agency’s two-year total to 2,203 cases.  The SEC secured orders imposing more than $3 billion in penalties and disgorgement, an 11% increase over the prior year.  This is double the agency’s budget of $1.5 million for FY12.  The SEC’s two-year total for penalties and disgorgement is $5.9 billion.  The SEC’s trial attorneys also fared well, winning 21 of 22 cases that went to trial.

This year, the SEC emphasized an increase in cases involving complex products and transactions, including cases related to the financial crises.  Twenty percent of the SEC’s cases came from investigations designated by the SEC as National Priority Cases, meaning the cases were among the SEC’s most important and complicated matters.

The SEC filed 29 cases related to the financial crisis that named 39 individuals, including 24 cases against CEOs, CFOs and other corporate officers.  Among the individuals sued by the SEC are the former senior officers at Fannie Mae and Freddy Mac, former investment bankers at Credit Suisse and executives at United Commercial Bank and TierOne Bank.

The SEC maintained its emphasis on insider trading brining 58 actions.  Over the past three years, the SEC has filed 168 insider trading matters.  The SEC charged Rajat Gupta for tipping hedge fund manager Raj Rajaratnam.  Other high-profile matters include the cases against hedge fund managers and analysts at Diamondback Capital and Level Global, and the charges filed against former professional baseball player Doug DeCinces.

The SEC also continued to focus on the investment adviser industry, filing 147 actions against investment advisers and investment companies.  The SEC brought enforcement cases against UBS Financial Services of Puerto Rico for allegedly providing misleading disclosures about mutual funds and Morgan Stanley Investment Management for improper fee arrangements. 

The FCPA also remains a SEC priority.  The agency filed 15 FCPA cases in FY 2012 including cases against former Siemens executives, Pfizer, Tyco International and a former Morgan Stanley executive.

The SEC’s numbers reflect that the agency is aggressively looking to bring yet more cases, particularly against corporate officers and investment advisers.  With the presidential election behind us, the SEC’s priorities will remain intact.  Given the SEC’s impressive numbers, the debate over additional funding for the agency should be pretty well settled.  We can expect to see that the SEC will increase its staff and brake more agency records over the coming year.

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