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Total SEC Enforcement Actions Against Public Companies and Subsidiaries Rise

The SEC brought 84 actions against public companies in FY 2015, compared to 55 actions in the previous fiscal year

Tuesday, May 17, 2016

By Corporate Compliance - SEED expands to include enforcement actions against public company subsidiaries

A report released today by the NYU Pollack Center for Law & Business and Cornerstone Research finds that U.S. Securities and Exchange Commission enforcements against public companies and their subsidiaries increased more than 50 percent in fiscal year 2015 and are on a pace to equal or exceed that high-water mark in FY 2016.

The SEC brought 84 actions against public companies and their subsidiaries in FY 2015, compared to 55 actions in the previous fiscal year. In the first half of FY 2016, the SEC filed 43 new enforcement actions against public companies and their related subsidiaries.

This research draws on the Securities Enforcement Empirical Database, which includes information on SEC enforcements against public companies, as well as recently added data on their subsidiaries. Launched last fall, SEED is a collaboration between the NYU Pollack Center and Cornerstone Research. The report, SEC Enforcement Activity against Public Companies and Their Subsidiaries—Midyear FY 2016 Update, is the first to analyze these new data.

“Our goal is to continually expand the information in SEED,” said Stephen Choi, the Murray and Kathleen Bring Professor of Law at the NYU School of Law and Director of the Pollack Center for Law & Business. “An important part of achieving this goal is the recent addition of enforcement actions against public company subsidiaries, which has almost doubled the number of regulatory actions in the database. Researchers and counsel can now use SEED to obtain a comprehensive view of SEC enforcement actions against public companies and their subsidiaries over the last seven fiscal years.”

“The new data in SEED reveal that the majority of SEC enforcement actions against subsidiaries of public companies focus on financial services firms,” said David Marcus, a Senior Vice President of Cornerstone Research. “The SEC has brought charges against subsidiaries of financial firms more often than their parent companies.”

Highlights

Between FY 2010 and the first half of FY 2016, the top 10 monetary settlements by public company and related subsidiary defendants ranged from $175 million to $550 million. Seven of these occurred in administrative proceedings, while three were in civil actions.
In the first half of FY 2016, there was a near-even split in SEC enforcements among allegations related to Issuer Reporting and Disclosure, the Foreign Corrupt Practices Act, Investment Advisor/Investment Companies and Municipal Securities/Public Pensions.
In FY 2015 and so far in FY 2016, the SEC has greatly increased the number of actions it has brought with Municipal Securities/Public Pensions allegations, consistent with the SEC’s stated priority for FY 2015 and FY 2016 of a continued focus on municipal securities.
The SEC continued to use its administrative proceeding forum in the vast majority of the actions analyzed. In the first half of FY 2016, the SEC brought 88 percent of actions against public company and related subsidiary defendants as administrative proceedings.
In the first half of FY 2016, 98 percent of SEC enforcements against public companies and their subsidiaries settled concurrently, on the same day the action was filed, the highest percentage recorded in the database.