United States: A Record Year: SEC FY 2022 Enforcement Actions Bring Big Penalties

By: Keri E. Riemer, Michael W. McGrath, Neil T. Smith, Hayley Trahan-Liptak, and Christopher F. Warner

On 15 November 2022, the U.S. Securities and Exchange Commission (SEC) announced its enforcement statistics for its 2022 fiscal year (FY 2022), noting that it filed 760 total enforcement actions — a 9% increase over fiscal year 2021.  This total was comprised of 462 new actions, 169 “follow-on” actions, and 129 actions for delinquent filings.  Money obtained in SEC actions, comprising civil penalties, disgorgement, and pre-judgment interest, totaled a record-breaking $6.439 billion (compared to $3.852 billion in fiscal year 2021).  Civil penalties, totaling $4.194 billion, were also the highest on record.

In commenting on the enforcement activity, SEC Chair Gary Gensler stated that he “continue[s] to be impressed with [the] Division of Enforcement…[R]esults change from year to year.  What stays the same is the staff’s commitment to follow the facts wherever they lead.”

While the SEC’s FY 2022 enforcement actions targeted diverse issues, the following, among others, were noteworthy:

  1. Settled actions against 17 firms for failing to retain business-related off-channel communications (e.g., personal text messages and WhatsApp) resulted in $1.235 billion in penalties, admissions of wrongful conduct, and significant remedial undertakings. The SEC has indicated that investigations into record retention will continue in 2023.
  2. Actions relating to materially misleading statements and/or omissions related to ESG matters.
  3. Actions against private fund advisers and associated individuals relating to fraud, custody rule violations, material misrepresentations and/or misleading statements and management fees.

The statistics for FY 2022, coupled with public statements from the SEC and its Staff, is further evidence of the SEC’s continuing aggressive posture.  With the SEC’s increased resources, investment advisers, broker-dealers, and other regulated entities should be mindful of these enforcement trends and should be on alert—and consider adjusting for—updates regarding the SEC’s priorities for 2023.

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