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SEC Actions Against Public Companies and Subsidiaries Declined Again in FY 2021

The U.S. Securities and Exchange Commission filed fewer enforcement actions against public companies and subsidiaries in fiscal year 2021, the lowest total in seven years. A report released today by the NYU Pollack Center for Law & Business and Cornerstone Research notes enforcement actions slowed as FY 2021 saw the continuing impact of the COVID-19 pandemic and transition to a new SEC Chair.

The report, SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2021 Update, analyzes data from the Securities Enforcement Empirical Database (SEED). The SEC filed 53 new actions against public companies and subsidiaries in FY 2021, which ended September 30. The FY 2021 total was down 15% from 62 actions the previous fiscal year and a steep drop from a record-high 95 actions in FY 2019.

While the SEC has indicated that the number of total enforcement actions increased in FY 2021, we saw a decline in the number of actions against public companies and subsidiaries.

“We have seen declines in filing activity after a change of administration in the past. The decrease in actions from FY 2020 to FY 2021, when Gary Gensler took over as the SEC’s Chair, is consistent with the trends seen in 2013 and 2017, other years in which a new SEC Chair was sworn in,” said report coauthor Sara Gilley, a Cornerstone Research vice president. “While the SEC has indicated that the number of total enforcement actions increased in FY 2021, we saw a decline in the number of actions against public companies and subsidiaries.”

Despite fewer enforcement actions against public companies and subsidiaries, SEC monetary settlements imposed in FY 2021 totaled $1.8 billion, up slightly from the FY 2020 total of $1.6 billion, which also was the average total for FY 2012–FY 2020. The average monetary settlement was $38 million, up $10 million from an average of $28 million the previous fiscal year. The median monetary settlement in FY 2021 was $1 million, down from prior years.

The SEC noted cooperation by 58% of public company and subsidiary defendants in actions settled in FY 2021, lower than the 62% in FY 2020 but consistent with the FY 2012–FY 2020 average. However, the number of defendants in public company or subsidiary actions that admitted guilt decreased in each of the past two years, from five in FY 2019, to two in FY 2020, to zero in FY 2021.

“For the first time in 10 years, no public company or subsidiary defendants admitted guilt in FY 2021,” said report coauthor Stephen Choi, the Bernard Petrie Professor of Law and Business at New York University School of Law and director of the Pollack Center for Law & Business. “It will be interesting to see if this trend changes, as the SEC recently announced a policy to seek admissions in certain cases as a way to improve the deterrent value of enforcement actions.” 

More than half (51%) of actions against public company and subsidiary defendants in FY 2021 involved issuer reporting and disclosure allegations, which has been the most frequent allegation type in eight of the last 10 fiscal years. FY 2021 was the first fiscal year in which more than half of the SEC’s enforcement actions were of the same allegation type.

Additional Highlights

  • The SEC brought 87% (46) of enforcement actions against defendants as administrative proceedings, compared to 13% (seven) in federal court. Six of the seven federal court actions did not have a concurrent resolution.

  • In FY 2021, 40% of defendants that settled had monetary settlements and no cooperation, slightly higher than the 37% average from FY 2012 through FY 2020.

  • Foreign Corrupt Practices Act actions accounted for only 8% of all actions against public companies and subsidiaries in FY 2021, the lowest percentage in the years SEED has tracked.

  • In FY 2021, the SEC filed the first COVID-19-related action against a public company or subsidiary.

  • ​One action with a public company or subsidiary defendant was filed against a SPAC in FY 2021, the first action against a SPAC in SEED.

About the Securities Enforcement Empirical Database (SEED)

The Securities Enforcement Empirical Database (SEED) tracks and records information for SEC enforcement actions filed against public companies and their subsidiaries. SEED also includes information on individuals who are named defendants in these actions. Created by the NYU Pollack Center for Law & Business in collaboration with Cornerstone Research, SEED facilitates the analysis and reporting of SEC enforcement actions through regular updates of new filings and settlement information for ongoing enforcement actions.

About the NYU Pollack Center for Law & Business

Established in 1997, the NYU Pollack Center for Law & Business is a joint venture of the NYU School of Law and the Stern School of Business. Its mission is to enrich the teaching curriculum at both schools in areas where law and business intersect; to facilitate professional interaction and academic research by faculty who share an interest in the structure, regulation, and function of the market economy; and to contribute to the public welfare by supporting scholarship that assists governmental and private policymakers in their pursuit of enhanced business productivity.

Copyright ©2022 Cornerstone ResearchNational Law Review, Volume XI, Number 321

About this Author

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.

Ms. Gilley manages the firm’s research related to enforcement actions by the Securities and Exchange Commission (SEC), and...

Heather B. Lazur, Cornerstone Research, economic and financial instruments

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.

Securities and valuation

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...

Lindsay Schick Senior Manager Cornerstone Research
Senior Manager

Lindsay Schick provides consulting services in litigation involving economic and financial issues. Her primary areas of focus include investment management, ERISA, mortgage lending and securitization, consumer finance, general damages, and the statistical analysis of big data.