Analysis

The Securities Enforcement Empirical Database (SEED) currently provides data for SEC actions initiated against public companies traded on major U.S. exchanges and their subsidiaries. We define public companies as companies with security prices that are tracked by the Center for Research in Security Prices.

 

The SEC initiated a total of 526 independent actions in FY 2019.  The 526 actions were higher than the average of 458 from FY 2013 through FY 2018.  Actions against public companies and subsidiaries accounted for 18 percent of the 526 independent actions.

The figure illustrates the number of SEC actions in each fiscal year 2010 to 2019

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The SEC filed 95 new enforcement actions against public companies and subsidiaries in FY 2019, the most in the 10 fiscal years tracked by SEED. The SEC’s Share Class Selection Disclosure Initiative (Share Class Initiative) accounted for 26 of the 95 actions (27 percent).

The figure illustrates the number of SEC actions against public companies and subsidiaries in each fiscal year 2010 to 2019

See color accessible chart. See full text description

 

SEED tracks the type of allegation the SEC makes in each enforcement proceeding. For the first time in the fiscal years covered by SEED, Investment Advisor/Investment Company was the most common allegation type in FY 2019 (35 actions), accounting for 37 percent of actions.

The figure contains a heat map of the percentages of SEC actions against public companies and subsidiaries for each allegation type from fiscal year 2010 to fiscal year 2019

See color accessible chart. See full text description.

 

In the first half of FY 2019, the SEC filed 100 percent of public company and subsidiary actions as administrative proceedings.  In 2H FY 2019, this dropped to 84 percent.

The figure illustrates the percentages of civil actions and administrative proceedings against public companies and subsidiaries for each fiscal year 2010 to 2019

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SEED classifies public companies and parent companies of subsidiaries by Standard Industrial Classification (SIC) code. In FY 2019, actions with public company and subsidiary defendants in the Finance, Insurance, and Real Estate industry accounted for 58 percent of all actions, higher than the average of 48 percent over the prior nine fiscal years.

The figure contains a heat map of the percentages of SEC actions against public companies and subsidiaries for each SIC industry division from fiscal year 2010 to fiscal year 2019

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In FY 2019, 76 percent of settlements with public companies and subsidiaries noted some form of cooperation with the SEC. This was a record-high percentage relative to the FY 2010–FY 2018 average of 51 percent. Since self-reporting was a condition of the Share Class Initiative, all 29 defendants involved in the initiative cooperated with the SEC. The percentage of defendants not involved in the Share Class Initiative that cooperated with the SEC in FY 2019 was also above average at 68 percent.

The figure illustrates, for each fiscal year from 2010 to 2019, the percentages of SEC actions against public companies and subsidiaries that noted: cooperation and monetary settlement; cooperation and no monetary settlement; no cooperation and monetary settlement; no cooperation and no monetary settlement

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Monetary settlements in public company and subsidiary actions totaled $1.5 billion in FY 2019, consistent with both the average and median of the total monetary settlements from FY 2010 through FY 2018 of $1.5 billion. Share Class Initiative actions accounted for 29 percent of the total actions with monetary settlements in FY 2019. These actions had an average monetary settlement of $3 million, substantially lower than the average for all other actions in FY 2019 of $21 million.

The figure illustrates the average monetary settlement and the median monetary settlement in each fiscal year 2010 to 2019

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Disgorgement and prejudgment interest comprised 59 percent ($852 million) of the $1.5 billion in monetary settlements imposed on public companies and subsidiaries in FY 2019, higher than the average of 51 percent from FY 2010 to FY 2018.

The figure illustrates the percentages of civil penalties and other monetary settlements vs. disgorgement and prejudgment interest against public companies and subsidiaries for each fiscal year 2010 to 2019.

See color accessible chart. See full text description.