Trends in SEC Enforcement: 1Q23, Part I

The number of cases filed each year by SEC enforcement is always a key statistic. While everyone correctly argues that it is the quality of the actions and not the numbers that is important, nevertheless the numbers are always of interest. That is because they signify and influence other issues. The numbers do, for example, provide an indication of how the program is being administered and its impact. Fewer cases may indicate a less aggressive program. More cases can at least suggest a more aggressive program. Yet the number of cases is, of course, not determinative of either point.

More cases can also suggest a broader reach for the agency, indicating perhaps more deterrent impact. Less cases might suggest the opposite. Again, the numbers are at best suggestive, and hardly determinative. At the same time there is no doubt that the agency has a huge task in trying to police the markets in this country. Viewed in that context diminishing numbers of enforcement actions could undermine the deterrent impact of the program which is important to the markets and the investing public.

There are four sections to this report as in the past: 1) The basic statistics being published; 2) examples of cases in each of the largest categories; 3) Examples of other significant actions filed by the agency during the period; and 4) the conclusion.

In the first quarter of 2023 SEC Enforcement filed 80 new enforcement actions. As usual most were civil injunctive actions. Specifically, 48 actions were filed in federal court. Another 32 enforcement actions were filed as administrative proceedings. These statistics exclude tag-along actions and subpoena enforcement cases.

The 80 new cases filed were based on a wide variety of fact patterns which is consistent with the trends and patterns in enforcement cases over the last several quarters. During the first quarter of 2023 the largest groups of cases were as follows:

Offering fraud   12%

Crypto assets     8%

Insider trading   4%

Financial fraud  3%

The statistics from the first quarter of 2022 are similar but not identical to those for the first quarter of 2023. The four largest groups of case filed were:

Investment advisers. 18.8%

Insider trading    13.2%

Offering fraud. 13.2%

Financial fraud    4.9%

The statistics for the first quarter of 2023 are, however, closer to those for the fourth quarter of 2022 which were:

Offering fraud    13%

Crypto assets    9%

Manipulation     9%

Insider trading   7%

While the types of cases in the largest groups are similar for the first quarter of 2023 and the last quarter of 2022, the numbers of cases filed during each of the periods is significantly different. In the last quarter of 2022, for example, 143 new enforcement actions were filed. In contract, in the first quarter of 2023 only 80 new enforcement actions were filed. That number compares favorably to the first quarter of 2022 when only 53 new cases were initiated. At the same time neither the first quarter of 2023 nor the first quarter of 2022 is close to the final quarter of 2022 in terms of the number of cases filed. The 143 actions filed during that period is even more remarkable considering the time period followed the last quarter of the Government fiscal year which is the period when typically the largest number of SEC enforcement actions are filed.