On February 20, 2015, the Securities and Exchange Commission (SEC) held its annual SEC Speaks conference, which updated the public regarding the staff’s work over the last year and its plans for 2015. The conference covered several areas, but this posting focuses on the chairman’s remarks regarding enforcement in 2014 and beyond.
In her opening remarks, SEC Chairman Mary Jo White said, “It was also an unprecedented year in enforcement, in terms of the number of cases and, more importantly, their subject matter.” In 2014, the SEC brought more than 700 actions and obtained approximately $4.1 billion in monetary relief. According to White, both of these were agency records. White felt that a meaningful measure of the enforcement program was the “quality and breadth” of the actions brought by the staff.
In 2014, the Enforcement Division showed a continued focus on areas such as market structure, broker-dealers, municipal securities, affinity fraud, financial reporting, gatekeepers, insider trading and microcap fraud. White noted that these are all areas where we can expect to see continued activity in 2015. Enforcement also brought several cases that were the first of their kind for the division. They included the following:
- Actions for failure to have adequate risk controls before providing market access to customers
- An action applying the staff’s whistleblower anti-retaliation authority
- An action against a private equity firm relating to its allocation of fees and expenses
- An emergency action to halt a fraudulent muni-bond offering
- An action against a broker-dealer for failing to have policies and procedures guarding against the misuse of retail customers’ material non-public information
These new cases broadened the scope of the Enforcement Division’s reach, but the staff renewed their focus on financial reporting and auditing fraud. This was apparent with the hiring of Michael Maloney as the chief accountant in the Enforcement Division back in February of last year. In 2014, the staff saw a 40 percent increase in financial reporting cases brought over the prior year. Several actions filed last year involved revenue recognition, auditor independence, and false and misleading financial disclosures. Based on White’s comments, the trend will continue into 2015 and beyond.