November 30, 2020

Volume X, Number 335

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Executive Summary: SEC Enforcement Activity: Public Companies and Subsidiaries

The SEC filed 61 actions against public company and subsidiary defendants in FY 2020—a decrease from the highs observed during recent fiscal years and the lowest total since FY 2014. Although new actions were down from their FY 2019 record high, the SEC imposed $1.6 billion in monetary settlements on defendants in public company and subsidiary actions, slightly surpassing FY 2019’s total.

Findings on public company and subsidiary defendants are based on data from the Securities Enforcement Empirical Database (SEED), a collaboration between the NYU Pollack Center for Law & Business and Cornerstone Research. SEED data cover FY 2010 through the present.[i]

Public companies are defined as those that traded on a major U.S. exchange as identified by the Center for Research in Security Prices (CRSP) at the time the enforcement action was initiated or within the five-year period preceding the initiation.

Filings and COVID-19

  • The SEC filed a total of 405 independent actions in FY 2020, the lowest number since FY 2013, yet the SEC imposed a record $4.68 billion in monetary settlements.[ii] 
  • While the SEC filed six actions related to COVID-19, none of these targeted a public company or subsidiary as defined by SEED. 
  • Of the total 405 actions, the SEC filed 61 actions against public companies and subsidiaries in FY 2020, the lowest number since FY 2014. 

Allegations

  • Issuer Reporting and Disclosure allegations increased to nearly half (49 percent) of actions filed in FY 2020 against public companies and subsidiaries, consistent with levels from fiscal years 2013–2014. 

  • The actions involving Issuer Reporting and Disclosure included the first two actions brought under the SEC’s new Earnings Per Share (EPS) Initiative.

Enforcement Venue

  • The SEC brought 11 percent of the public company and subsidiary actions in federal court during FY 2020, consistent with the 10 percent average over the last five fiscal years

Disgorgement was a major component of monetary settlements in FY 2020. The SEC imposed $565 million in disgorgement and prejudgment interest for civil actions, the highest amount in a fiscal year since the start of the SEED database in 2010.

Stephen Choi
Murray and Kathleen Bring Professor of Law
Director of the Pollack Center for Law & Business
New York University

Industry

  • Filings against Manufacturing or Services industry defendants increased from a combined 23 percent in FY 2019 to a combined 41 percent of FY 2020 actions against public companies and subsidiaries. 

Settlements

  • Settlements imposed in public company and subsidiary actions that noted cooperation by defendants declined from a record-high 77 percent in FY 2019 to 62 percent in FY 2020, which is still above the historical average of 54 percent from FY 2010 to FY 2019. 
  • Monetary settlements imposed in public company and subsidiary actions totaled $1.6 billion in FY 2020, including two actions with settlements of $500 million or more. 
  • The share of total monetary settlements imposed in public company and subsidiary actions from disgorgement and prejudgment interest in civil actions increased to 35 percent, from an average of 14 percent over the last five fiscal years. This increase was driven by a large settlement in a single FCPA action. 

Read SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2020 Update.


[i]      SEC fiscal years begin on October 1 of the prior year and end on September 30. SEC fiscal year 2010 through fiscal year 2020 spans October 1, 2009, to September 30, 2020.

[ii]     See “Division of Enforcement Annual Report 2020,” U.S. Securities and Exchange Commission, November 2, 2020, p. 7, https://www.sec.gov/files/enforcement-annual-report-2020.pdf.

Copyright ©2020 Cornerstone ResearchNational Law Review, Volume X, Number 326
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Sara E. Gilley, Cornerstone Research, securities and white collar litigation
Vice President

Sara Gilley specializes in securities and white-collar litigation. She consults on economic and financial issues related to federal class actions, corporate investigations, and government enforcement activity. Ms. Gilley also has experience in matters brought under international securities laws. She works with clients in all phases of litigation, including motion to dismiss, class certification, merits, and testimony.

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Heather B. Lazur, Cornerstone Research, economic and financial instruments
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Heather Lazur specializes in cases involving a range of economic and financial issues and instruments, including securities class actions, and cases involving investment performance and strategy, valuation, mutual funds, and mortgage-backed securities.

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In securities cases, Ms. Lazur has addressed class certification, market efficiency, loss causation, and damages. Ms. Lazur also has experience valuing companies, products, and lost profits. The matters she has worked on have...

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Lindsay Schick Senior Manager Cornerstone Research
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