Monetary settlements imposed in FY 2021 totaled $1.8 billion.
New York—The U.S. Securities and Exchange Commission filed fewer enforcement actions against public companies and subsidiaries in fiscal year 2021, the lowest total in seven years. A report released today by the NYU Pollack Center for Law & Business and Cornerstone Research notes enforcement actions slowed as FY 2021 saw the continuing impact of the COVID-19 pandemic and transition to a new SEC Chair.
The report, SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2021 Update, analyzes data from the Securities Enforcement Empirical Database (SEED). The SEC filed 53 new actions against public companies and subsidiaries in FY 2021, which ended September 30. The FY 2021 total was down 15% from 62 actions the previous fiscal year and a steep drop from a record-high 95 actions in FY 2019.
“We have seen declines in filing activity after a change of administration in the past. The decrease in actions from FY 2020 to FY 2021, when Gary Gensler took over as the SEC’s Chair, is consistent with the trends seen in 2013 and 2017, other years in which a new SEC Chair was sworn in,” said report coauthor Sara Gilley, a Cornerstone Research vice president. “While the SEC has indicated that the number of total enforcement actions increased in FY 2021, we saw a decline in the number of actions against public companies and subsidiaries.”
Despite fewer enforcement actions against public companies and subsidiaries, SEC monetary settlements imposed in FY 2021 totaled $1.8 billion, up slightly from the FY 2020 total of $1.6 billion, which also was the average total for FY 2012–FY 2020. The average monetary settlement was $38 million, up $10 million from an average of $28 million the previous fiscal year. The median monetary settlement in FY 2021 was $1 million, down from prior years.
The SEC noted cooperation by 58% of public company and subsidiary defendants in actions settled in FY 2021, lower than the 62% in FY 2020 but consistent with the FY 2012–FY 2020 average. However, the number of defendants in public company or subsidiary actions that admitted guilt decreased in each of the past two years, from five in FY 2019, to two in FY 2020, to zero in FY 2021.
“For the first time in 10 years, no public company or subsidiary defendants admitted guilt in FY 2021,” said report coauthor Stephen Choi, the Bernard Petrie Professor of Law and Business at New York University School of Law and director of the Pollack Center for Law & Business. “It will be interesting to see if this trend changes, as the SEC recently announced a policy to seek admissions in certain cases as a way to improve the deterrent value of enforcement actions.”
More than half (51%) of actions against public company and subsidiary defendants in FY 2021 involved issuer reporting and disclosure allegations, which has been the most frequent allegation type in eight of the last 10 fiscal years. FY 2021 was the first fiscal year in which more than half of the SEC’s enforcement actions were of the same allegation type.