More than half of new actions targeted investment advisers/investment companies or broker dealers.

The number of new U.S. Securities and Exchange Commission enforcement actions against public companies and subsidiaries in fiscal year 2019 rose more than 30% over the previous fiscal year, driven by self-reporting under the SEC’s Share Class Selection Disclosure Initiative (Share Class Initiative), according to a report released by the NYU Pollack Center for Law & Business and Cornerstone Research.

The report, SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2019 Update, analyzes data from the Securities Enforcement Empirical Database. The report shows that the SEC filed 95 new actions against public companies and subsidiaries in FY 2019, up from 72 in the previous year and the highest number in any fiscal year since SEED began tracking the data in FY 2010.

The majority of the investment adviser/investment company actions were part of the Share Class Initiative and, as such, the monetary settlements did not include a civil penalty.

Enforcement actions stemming from the Share Class Initiative accounted for 27% of the total actions against public companies and subsidiaries in FY 2019, which ended September 30. The initiative addresses investment advisers’ failure to make required disclosures related to fees received for recommending certain mutual funds.

“As part of the SEC’s stated focus on retail investors, more than half of new actions against public companies and subsidiaries in FY 2019 targeted investment advisers/investment companies or broker dealers,” said Kathleen Bring Professor of Law at the NYU School of Law and director of the Pollack Center for Law & Business. “The majority of the investment adviser/investment company actions were part of the Share Class Initiative and, as such, the monetary settlements did not include a civil penalty.”

Monetary settlements in public company and subsidiary enforcement actions totaled $1.5 billion in FY 2019, down substantially from more than $2.4 billion in FY 2018 but consistent with both the FY 2010–FY 2018 average and median total of $1.5 billion.

Additional Highlights

• The SEC brought the highest number of actions with issuer reporting and disclosure allegations (28 actions) in the 10 years covered by SEED.
• In FY 2019, the SEC noted cooperation by 76% of defendants, a record-high percentage and substantially higher than the FY 2010–FY 2018 average of 51%.
• In the first half of FY 2019, the SEC brought 100% of enforcement actions as administrative proceedings; in the second half, this dropped to 84%.
• Challenges to the constitutionality of protections preventing removal of the SEC’s administrative law judges (ALJs) continued in FY 2019 with a new defendant filing challenges following the August 2019 dismissal of Lucia v. SEC.
• The largest settlement amount imposed in a public company or subsidiary action in FY 2019 was $147 million, the lowest maximum in a fiscal year in SEED. The average monetary settlement amount for public and subsidiary actions during the period was $16 million.

Read SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2019 Update.

This post features contributions from Stephen Choi Murray and Kathleen Bring Professor of Law, School of Law; Director, Pollack Center for Law & Business; New York University.