Written by Mark Buckley-Jones
Director
The Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) both play crucial roles in regulating and enforcing securities and commodities laws in the United States. Both agencies recently announced their enforcement results for their respective fiscal years.
SEC
The SEC announced that it filed 784 enforcement actions during its 2023 fiscal year, a 3% increase over the previous year, including:
- 501 original enforcement actions, an 8% increase year over year;
- 162 “follow-on” administrative proceedings seeking to bar or suspend individuals from certain functions in the securities markets based on criminal convictions, civil injunctions, or other orders; and
- 121 actions against issuers who were allegedly delinquent in making required filings with the SEC.
The enforcement actions covered a wide range of violations, including but not limited to insider trading, accounting fraud, disclosure failures, and market abuse. Notably, the SEC has been vigilant in addressing emerging issues such as cybersecurity concerns and digital asset compliance.
The SEC secured significant monetary sanctions in its enforcement actions, reporting orders for $4.9 billion in financial remedies, the second highest amount in its history. The financial remedies comprised $3.4 billion in disgorgement and prejudgment interest and $1.6 billion in civil penalties. Both the disgorgement and civil penalties ordered were the second highest amounts on record. 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.
In addition, the SEC distributed $930 million to harmed investors in fiscal year 2023, marking the second consecutive year with more than $900 million in distributions.
In its results, the SEC highlighted the value of cooperation in its enforcement efforts. Companies and individuals who cooperated with investigations were acknowledged, and the whistleblower program continued to play a crucial role in identifying and addressing violations. Fiscal year 2023 was a record-breaking year for its Whistleblower Program, and whistleblower awards totaling nearly $600 million were issued, the most ever awarded in one year, including a record-breaking $279 million awarded to one whistleblower.
CFTC
The CFTC’s enforcement results included “a record setting number of digital asset cases, actions to hold registrants to their regulatory obligations, manipulation and spoofing actions, and precedent-setting court decisions in complex litigations.” In total, the CFTC filed 96 enforcement actions resulting in over $4.3 billion in penalties, restitution and disgorgement. Both metrics showed an increase year over year, when the Commission initiated 82 enforcement actions, imposing more than $2.5 billion in fines.
The CFTC also noted the importance of its whistleblower program, reporting that it granted nearly $350 million in awards to 41 whistleblowers during the year and imposing more than $3 billion in total sanctions from whistleblower-related enforcement actions.
Summary
The SEC and CFTC’s enforcement results reflect their commitment to maintaining fair, transparent, and efficient financial markets. From protecting retail investors to addressing emerging issues like cybersecurity and ESG, both agencies continue to evolve their enforcement strategies. As financial markets become increasingly complex, ongoing collaboration, technological advancements, and a proactive regulatory stance are essential to overcoming challenges and ensuring the effectiveness of enforcement efforts.
The implications of SEC and CFTC enforcement actions extend beyond just monetary penalties and legal consequences. Robust enforcement sends a clear signal to market participants about the regulatory expectations and consequences of non-compliance.
Both regulators have been demonstrably active this year. In a time where the CFTC, specifically, has noted that it will no longer accept “neither-admit-nor-deny” settlements in many cases and that it will increase penalties in certain cases to combat repeat offenders, the importance of having sound policies and procedures cannot be overstated. Proactively investing time and resources in a thorough mock audit serves as a valuable opportunity to assess your compliance with regulatory guidelines and regulations in a controlled environment.
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