The Securities and Exchange Commission brought 715 enforcement cases and obtained a record-breaking $4.68 billion in disgorgement and penalties in fiscal year 2020, while the cases against advisors and broker-dealers decreased sharply, the agency announced today.
In the face of the unprecedented COVID shutdown, the Commission also obtained more than 475 bars or suspensions against market participants and suspended trading in the securities of 196 issuers. In addition, the Division triaged approximately 23,650 incoming tips, complaints, and referrals and opened close to 1,200 new inquiries and investigations — the most in commission history, according to the SEC’s Division of Enforcement Annual Report .
All told, parties in the Commission’s actions and proceedings were ordered to pay a total of $3.589 billion in disgorgement of ill-gotten gains. Penalties imposed totaled $1.091 billion, in line with Fiscal Year 2019’s $1.101 billion penalty total. Total monetary relief ordered in FY 2020 was $330 million higher than in Fiscal Year 2019, an approximately 8% increase.
“The Commission places a significant priority on returning funds to harmed investors whenever possible,” SEC Director of the Enforcement Stephanie Avakian said. “Consistent with that goal, the Commission returned $602 million to harmed investors in Fiscal Year 2020. These distributions comprised over 800,000 individual payments to investors from 91 fair funds and court-appointed administrators.”
Securities offering violations accounted for 32% of enforcement actions in 2020, with investment advisor/investment company violations coming in second at 21%. Issuer reporting came in third at 15%, with broker-dealers coming in fourth, accounting for 10% of enforcement proceedings.
The number of cases the SEC brought against investment advisors and broker-dealers both fell. In the case of advisors, which includes enforcements against investment companies, cases fell from 191 in 2019 to 87. Cases against broker-dealers fell from 162 to 142. But that doesn’t tell the whole story.
Avakian said that the agency’s continued focus is on protecting retail investors in 2020. “Over the last year, we brought several cases involving the conduct of investment professionals as it relates to retail investors. One involved filing an action against Wells Fargo for failing to reasonably supervise investment advisers and registered representatives who recommended complex, high-volatility single-inverse ETFs to retail investors, and for lacking adequate compliance policies and procedures with respect to the suitability of those recommendations. The commission imposed a penalty of $35 million on Wells Fargo, which will be distributed to investors,” the SEC said.