Trends in SEC Enforcement: 3Q23: Part I
Introduction
This is the first installment of a four part series analyzing the trends in SEC enforcement during the third calendar quarter of 2023. The series will focus on the number of cases brought during the period and the types of actions filed.
When the data from this third quarter of the year is compared to that from other quarters and periods it can help assess the overall direction of SEC enforcement. Considering the direction of SEC enforcement can aid those involved with regulated entities, such as brokers and investment advisers, as well as others who deal with the Commission periodically.
The series has four segments: 1) Basic statistics; 2) examples of cases in each of the leading areas; 3) examples of significant cases not in the leading categories; and 4) the conclusion.
The Statistics
The number of new cases filed during each period, and the areas in which they are brought, are always key statistics. While the numbers are not determinative in and of themselves, when considered in context they can reveal matters such as focus, areas of concentration and other significant information. When placed in the large context of other time periods even more information about the enforcement program can be garnered.
During the third quarter of 2023 SEC enforcement filed 144 new enforcement actions. Well over half of the cases filed during the period were civil injunctive actions – 81 – while the balance –63 – were administrative proceedings.
By any measure, the number of new cases filed during the third quarter of the year is impressive, particularly when compared to other periods. For example, when the number cases filed during 3Q23 is compared to that for the first quarter of each of the last three years, the number dwarfs that from other periods: In 1Q23 80 new cases were filed while in 1Q 22 only 48 new while the same number as filed in 1Q21.
Only when the number of new cases filed in 3Q23 is compared to that from earlier years in the third quarter of the year are the numbers comparable. In 3Q22 a total of 129 new cases were filed. In 3Q 21, however, a total number was 144. The numbers are comparable because traditionally the agency focuses on filing large numbers of cases in the third quarter of the year which is the end of the government fiscal year when performance statistics are finalized and complied for Congressional hears and other, similar purposes.
The largest groups of cases brought in the third quarter were as follows:
Offering frauds 25%
Insider trading 9%
Crypto assets 5.5%
Manipulation 4.8%
Misrepresentation 4.8%
These statistics demonstrate that over 34% of the cases filed during 3Q23 were either offering frauds or involved insider trading. Thus, despite the large number of cases initiated during the period the percentages reflect the fact that that the cases were concentrated in two typical areas in which actions are brought. Perhaps more importantly, the concentration into the offering fraud and insider trading areas in 3Q23 essentially mirrors that of the prior quarter when the top two categories were also offering frauds at, but at 29%, and insider trading at 9% for a total of over 36% of cases filed during the period. This at least suggests that that the focus of enforcement may be narrowing compared to earlier periods, a question that will be revisited at the conclusion of the series.
Next: Part II (Tuesday Jan. 6, 2024) – Examples of cases filed in each of the largest five categories for 3Q23.
Trends in SEC Enforcement: 3Q23: Part I
Introduction
This is the first installment of a four part series analyzing the trends in SEC enforcement during the third calendar quarter of 2023. The series will focus on the number of cases brought during the period and the types of actions filed.
When the data from this third quarter of the year is compared to that from other quarters and periods it can help assess the overall direction of SEC enforcement. Considering the direction of SEC enforcement can aid those involved with regulated entities, such as brokers and investment advisers, as well as others who deal with the Commission periodically.
The series has four segments: 1) Basic statistics; 2) examples of cases in each of the leading areas; 3) examples of significant cases not in the leading categories; and 4) the conclusion.
The Statistics
The number of new cases filed during each period, and the areas in which they are brought, are always key statistics. While the numbers are not determinative in and of themselves, when considered in context they can reveal matters such as focus, areas of concentration and other significant information. When placed in the large context of other time periods even more information about the enforcement program can be garnered.
During the third quarter of 2023 SEC enforcement filed 144 new enforcement actions. Well over half of the cases filed during the period were civil injunctive actions – 81 – while the balance –63 – were administrative proceedings.
By any measure, the number of new cases filed during the third quarter of the year is impressive, particularly when compared to other periods. For example, when the number cases filed during 3Q23 is compared to that for the first quarter of each of the last three years, the number dwarfs that from other periods: In 1Q23 80 new cases were filed while in 1Q 22 only 48 new while the same number as filed in 1Q21.
Only when the number of new cases filed in 3Q23 is compared to that from earlier years in the third quarter of the year are the numbers comparable. In 3Q22 a total of 129 new cases were filed. In 3Q 21, however, a total number was 144. The numbers are comparable because traditionally the agency focuses on filing large numbers of cases in the third quarter of the year which is the end of the government fiscal year when performance statistics are finalized and complied for Congressional hears and other, similar purposes.
The largest groups of cases brought in the third quarter were as follows:
Offering frauds 25%
Insider trading 9%
Crypto assets 5.5%
Manipulation 4.8%
Misrepresentation 4.8%
These statistics demonstrate that over 34% of the cases filed during 3Q23 were either offering frauds or involved insider trading. Thus, despite the large number of cases initiated during the period the percentages reflect the fact that that the cases were concentrated in two typical areas in which actions are brought. Perhaps more importantly, the concentration into the offering fraud and insider trading areas in 3Q23 essentially mirrors that of the prior quarter when the top two categories were also offering frauds at, but at 29%, and insider trading at 9% for a total of over 36% of cases filed during the period. This at least suggests that that the focus of enforcement may be narrowing compared to earlier periods, a question that will be revisited at the conclusion of the series.
Next: Part II (Tuesday Jan. 6, 2024) – Examples of cases filed in each of the largest five categories for 3Q23.