December 8, 2021

Volume XI, Number 342

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December 07, 2021

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December 06, 2021

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2021 SEC Enforcement Results – Takeaways for Fund Managers

On November 18, 2021, the SEC’s Division of Enforcement announced its Enforcement Results for Fiscal Year 2021, and there are a few key takeaways for fund managers.

  • In spite of the continued headwinds posed by the global COVID-19 pandemic, the Commission brought 697 enforcement actions in FY 2021. The Commission also filed 434 new enforcement actions, representing a seven percent increase over the prior year. Seventy percent of these new or “standalone” actions involved at least one individual defendant or respondent.

  • Investment advisor and investment company cases accounted for 120 standalone actions in the past year (28% of total new cases, up from 21% in FY 2020).

  • Insider trading cases accounted for 28 standalone, two fewer than FY 2020.

  • The SEC also obtained judgments and orders for nearly $2.4 billion in disgorgement and more than $1.4 billion in penalties, which represented a respective 33 percent decrease and 33 percent increase over amounts ordered during the prior fiscal year in these categories.

  • The Commission awarded a record amount of whistleblower awards in FY 2021, awarding a total of $564 million to 108 whistleblowers. The whistleblower program also surpassed $1 billion in awards over the life of the program.

The Commission also highlighted its actions against individuals and gatekeepers and cases involving crypto, financial fraud and issuer disclosures, investment professionals, market integrity, insider trading and market manipulation, FCPA matters, public finance abuse, and securities offerings.

Enforcement Actions Filed in Fiscal Years 2016 to 2021

 

FY 2021

FY 2020

FY 2019

FY 2018

FY 2017

FY 2016

Standalone Enforcement Actions (Civil and Admin. Proceedings)

434

405

526

490

446

548

Follow-On Admin. Proceedings

143

180

210

210

196

195

Delinquent Filings

120

130

126

121

112

125

Total Actions

697

715

862

821

754

868

Disgorgement and Penalties Ordered (in billions)

$3.80

$4.68

$4.35

$3.95

$3.79

$4.08

Under former Chairman Clayton, private fund advisers benefited indirectly from the SEC’s focus on “Main Street” investors.  More of the SEC’s limited resources were devoted to addressing retail fraud, leaving fewer resources available to focus on private funds.  As former Enforcement Director Stephanie Avakian explained recently, the SEC relied more heavily on exams by OCIE (now the “Division of Examinations”) – through deficiency notices and remediation, rather than enforcement actions – to address perceived private fund compliance violations.

For much of 2021, the SEC has been in transition as new staff was appointed.  Over the coming year, we expect that Chairman Gensler and Enforcement Director Grewal will place a far greater emphasis on policing “Wall Street,” which today has grown to encompass private funds.  Now that the pieces are in place, we expect to see an increase in enforcement involving private fund managers.

© 2021 Proskauer Rose LLP. National Law Review, Volume XI, Number 327
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About this Author

Joshua Newville, Proskauer Rose, regulatory enforcement attorney, industry compliance legal counsel, securities exchange commission lawyer
Partner

Joshua M. Newville is a partner in the Litigation Department in New York. His practice focuses on commercial litigation and regulatory investigations. Mr. Newville advises companies and individuals in securities litigation and compliance matters. He also focuses on internal investigations and enforcement matters. Prior to joining Proskauer, Josh was senior counsel in the U.S. Securities and Exchange Commission’s Division of Enforcement, where he investigated and prosecuted violations of the federal securities laws. Josh served in the Enforcement Division’s Asset...

212-969-3336
Samuel Waldon, Proskauer Law Firm, Washington DC, Corporate Law and Litigation Attorney
Partner

Sam Waldon is a partner in the Litigation Department and a member of the Securities Litigation, White Collar Defense & Investigations and Asset Management Litigation Groups.

Sam’s practice focuses on securities litigation, enforcement and regulatory matters. He represents corporations and financial institutions, and their officers, directors and employees, in investigations, exams, internal investigations and litigation. Sam has in-depth experience in a broad range of Securities and Exchange Commission (SEC) enforcement matters, including...

202-416-6858
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