Total monetary value of settlements fell to lowest level in last eight fiscal years.
The U.S. Securities and Exchange Commission (SEC) filed 91 enforcement actions against public companies and subsidiaries in fiscal year 2023, a 34% increase over FY 2022, according to a report released today by Cornerstone Research and the NYU Pollack Center for Law & Business. That increase contrasted with monetary settlements in public company and subsidiary actions, which decreased to $1.3 billion, the lowest total in the last eight fiscal years. This was down more than 50% year-over-year, and 30% lower than the average annual total monetary settlement amount from FY 2014 through FY 2022.
The report, SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2023 Update, analyzes information from the Securities Enforcement Empirical Database (SEED). The 91 actions filed in FY 2023, which ended September 30, were the third highest of any fiscal year in SEED, which has a dataset beginning with FY 2010. The SEC filed more than one-third (31) of those actions in September, the final month of the fiscal year, contributing substantially to the total.
In FY 2023, 13% of defendants that cooperated settled without monetary penalty. This is more than triple the average rate over FY 2014–FY 2022.
“The increase in actions coincided with above-average levels of cooperation and admissions of guilt,” said Stephen Choi, the Bernard Petrie Professor of Law and Business at New York University School of Law and Director of the NYU Pollack Center for Law & Business. “Nearly 70% of public companies and subsidiaries that settled in FY 2023 cooperated with the SEC. The SEC also obtained 16 admissions of guilt, matching last year’s record, all but one of which were obtained from cooperating defendants.”
The average settlement per action for FY 2023 was $15 million, the smallest since FY 2015 and $27 million lower than the FY 2022 average of $42 million. This marked the largest year-over-year dollar decrease in SEED. Only 87% of cooperating defendants had monetary settlements imposed, as compared to 94% of the defendants without cooperation noted.
“While current SEC leadership continues to ‘emphasize robust penalties,’ the agency has acknowledged that it has ‘aggressively rewarded meaningful cooperation,’ which frequently resulted in zero or substantially reduced penalties in FY 2023,” said report coauthor Sara Gilley, a Cornerstone Research vice president. “In FY 2023, 13% of defendants that cooperated settled without monetary penalty. This is more than triple the average rate over FY 2014–FY 2022.”
Issuer Reporting and Disclosure continued to be the most prevalent allegation type in FY 2023, accounting for 45% of all actions filed and more than 1.5 times as many actions as in FY 2022. Broker Dealer allegations remained above the historical average at 19% of actions and were the second most common allegation type, while Investment Adviser/Investment Company allegations declined to 7% of actions.
