Catching investment and retirement fund fraudsters is a never-ending job. So here’s some good news: Enforcement by the feds is on the upswing, with more wrongdoers going to jail and victims being compensated for their losses.
Enforcement by the the Securities and Exchange Commission (SEC) increased by 9% during Fiscal Year 2022. The SEC filed 760 total enforcement actions, which included new or stand-alone penalties, and 129 clampdowns against those who didn’t make required filings with the SEC.
And the SEC kicked off 169 proceedings to bar or suspend rulebreakers from securities markets because of their criminal convictions or civil injunctions made against them.
Theft victims: ‘Show us the money!’
Even more impressive than the amount of new enforcement is the amount of money the SEC recovered in FY 2022. The SEC set an all-time record of $6.439 billion in money ordered in SEC actions, a big jump from $3.852 billion in FY 2021.
That $6.439 billion windfall includes civil penalties ($4.194 billion, also an all-time SEC record), disgorgement and pre-judgment interest. Also: Whistleblower awards in the number of individuals awarded and the total dollar amounts awarded were the second highest ever.
The SEC’s $100 million penalty against Ernst & Young was the largest-ever involving an auditing firm. Ernst & Young admitted, among other things, that a significant number of its auditors cheated on the ethics component of CPA exams and continuing professional education course credits needed to maintain their CPA licenses.
Room for improvement in the courtroom
In the small handful of contested cases, the SEC only racked up an 80% win rate. Not bad but not as strong, for example, as the Department of Justice’s typical annual winning average.
Of the 15 cases that went before a judge, the SEC won 12. The SEC’s enforcement division has never fought that many cases in a single year. The cases covered issues such as investment advisory fraud and securities fraud.
The positive spin? Folks who might be tempted to pull a fast one with employees’ and retirees’ money should take heed – the feds are as serious about recovering stolen funds as they are about putting rule breakers behind bars. And that’s welcome relief for the vast majority of finance professionals who act above board at all times.
“We are using every tool in our toolkit, including penalties that have a deterrent effect and are viewed as more than the cost of doing business,” says the SEC’s enforcement chief Gurbir Grewal. “While we set [records], we don’t expect to break these records and set new ones each year because we expect behaviors to change. We expect compliance.”