Trends in SEC Enforcement: 2Q23 – Part I
This is Part I of a four part series which analyzes trends in SEC enforcement during the second quarter of 2023. A previous series analyzed the trends during the first quarter of the year (here).
During the second quarter of the year the Commission’s enforcement program filed a total of 46 new enforcement cases. During the period 36 civil injunctive actions were filed in federal court while 10 actions were filed as administrative proceedings.
The four largest categories of cases filed during 2Q23 were:
Offering frauds 29%
Insider trading 9%
Manipulation 8%
Financial fraud. 7%
As the statistics above reflect, the 46 actions filed during the quarter were heavily concentrated in one area — offering frauds. That concentration in one area contrasts sharply with the results from one year ago, the second quarter of 2022. During that period 101 new enforcement actions were filed. That number is more than double the number filed during the second quarter of 2023.
The cases filed during 2Q22 were also spread over a wider variety of areas as the statistics from the period demonstrate:
Offering frauds 8.9%
Transfer agents 6.8%
Manipulation. 6.9%
Financial fraud 4.9%
Insider Trading. 3.9%
With the exception of the cases involving transfer agents, the categories were the same as those one year later. Those involving transfer agents resulted from a special initiative or sweep in that area.
Of more significance, however, is the fact that none of the percentages for 2Q22 are in double digits. This resulted because the number of categories in which cases were filed which was significantly larger during 2Q22 than in 2Q23. Thus, for example, while during each period cases involving offering frauds was the largest group of actions initiated, the percentage of those cases constituted just under 30% in 2Q23 while in the prior year the percentage was just under 10%. This was not because more cases were filed in the second quarter of 2022 compared to 2Q23. Rather it was because the number of categories of actions in which cases were brought in the second quarter of 2022 was much larger than in the second quarter of 2023.
If this trend continues it would represent a significant change in SEC enforcement. For the last several quarters the agency has consistently expanded its reach, bringing cases in what seemed to be ever increasing numbers of areas creating a kind of ubiquitous reach we called “a cop on every corner” in an earlier series on Enforcement trends (here). If the results for the second quarter of 2023 continue, it may suggest that the agency has narrowed the focus of its enforcement program. Stated differently, Enforcement has diminished its market place presence not because the number of cases brought declined in 2Q23 compared to 2Q22, but more importantly, because the presence or reach of enforcement in the market place contracted. That could have significant ramifications for investor and market protection, particularly since the markets continually expand.
The total number of cases for the first half of 2023 filed by the Commission also diminished compared to 2022. In 2023 a total of 94 enforcement actions were filed during the first half of the calendar year. That contrasts with 2022 when a total of 154 actions were filed during the first half of the calendar year. While the total number of cases filed is not, in and of itself, significant, in 2023 the number was reduced by over 30%. Again, if that trend continues during the following periods, which will be examined in future articles, it may be significant.
Next: Part II – Examples of cases filed in each of the largest four largest categories for 2Q23.
Trends in SEC Enforcement: 2Q23 – Part I
This is Part I of a four part series which analyzes trends in SEC enforcement during the second quarter of 2023. A previous series analyzed the trends during the first quarter of the year (here).
During the second quarter of the year the Commission’s enforcement program filed a total of 46 new enforcement cases. During the period 36 civil injunctive actions were filed in federal court while 10 actions were filed as administrative proceedings.
The four largest categories of cases filed during 2Q23 were:
Offering frauds 29%
Insider trading 9%
Manipulation 8%
Financial fraud. 7%
As the statistics above reflect, the 46 actions filed during the quarter were heavily concentrated in one area — offering frauds. That concentration in one area contrasts sharply with the results from one year ago, the second quarter of 2022. During that period 101 new enforcement actions were filed. That number is more than double the number filed during the second quarter of 2023.
The cases filed during 2Q22 were also spread over a wider variety of areas as the statistics from the period demonstrate:
Offering frauds 8.9%
Transfer agents 6.8%
Manipulation. 6.9%
Financial fraud 4.9%
Insider Trading. 3.9%
With the exception of the cases involving transfer agents, the categories were the same as those one year later. Those involving transfer agents resulted from a special initiative or sweep in that area.
Of more significance, however, is the fact that none of the percentages for 2Q22 are in double digits. This resulted because the number of categories in which cases were filed which was significantly larger during 2Q22 than in 2Q23. Thus, for example, while during each period cases involving offering frauds was the largest group of actions initiated, the percentage of those cases constituted just under 30% in 2Q23 while in the prior year the percentage was just under 10%. This was not because more cases were filed in the second quarter of 2022 compared to 2Q23. Rather it was because the number of categories of actions in which cases were brought in the second quarter of 2022 was much larger than in the second quarter of 2023.
If this trend continues it would represent a significant change in SEC enforcement. For the last several quarters the agency has consistently expanded its reach, bringing cases in what seemed to be ever increasing numbers of areas creating a kind of ubiquitous reach we called “a cop on every corner” in an earlier series on Enforcement trends (here). If the results for the second quarter of 2023 continue, it may suggest that the agency has narrowed the focus of its enforcement program. Stated differently, Enforcement has diminished its market place presence not because the number of cases brought declined in 2Q23 compared to 2Q22, but more importantly, because the presence or reach of enforcement in the market place contracted. That could have significant ramifications for investor and market protection, particularly since the markets continually expand.
The total number of cases for the first half of 2023 filed by the Commission also diminished compared to 2022. In 2023 a total of 94 enforcement actions were filed during the first half of the calendar year. That contrasts with 2022 when a total of 154 actions were filed during the first half of the calendar year. While the total number of cases filed is not, in and of itself, significant, in 2023 the number was reduced by over 30%. Again, if that trend continues during the following periods, which will be examined in future articles, it may be significant.
Next: Part II – Examples of cases filed in each of the largest four largest categories for 2Q23.