In the past year, the SEC filed 868 enforcement actions exposing misconduct by companies, executives, registrants and gatekeepers — a new record.

The record includes the most cases involving investment advisers or investment companies ever, at 160, and the most independent or standalone cases involving investment advisers or investment companies ever, at 98. The agency also reached new highs for Foreign Corrupt Practices Act-related enforcement actions, at 21. and money distributed to whistleblowers (US$57 million) in a single year.

The agency also brought a record 548 standalone or independent enforcement actions and obtained judgments and orders totaling more than US$4 billion in disgorgement and penalties.

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“Over the last three years, we have changed the way we do business on the enforcement front by using new data analytics to uncover fraud, enhancing our ability to litigate tough cases, and expanding the playbook bringing novel and significant actions to better protect investors and our markets,” says SEC Chair Mary Jo White.

The SEC’s most significant enforcement actions in fiscal year 2016 include:

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The agency also brought first-of-their-kind actions in fiscal year 2016, including charges against: a firm solely for failing to file Suspicious Activity Reports when appropriate; an audit firm for auditor independence failures predicated on close personal relationships with audit clients; municipal advisors for violating the fiduciary duty for municipal advisors created by the 2010 Dodd-Frank Act and the municipal advisor antifraud provisions of the Dodd-Frank Act; a private equity adviser for acting as an unregistered broker; and an issuer of retail structured notes for misstatements and omissions. In addition, fiscal year 2016 included a first-of-its-kind trial victory: the first federal jury trial by the SEC against a municipality and one of its officers for violations of the federal securities laws.

Holding gatekeepers accountable

  • Held attorneys, accountants and other gatekeepers accountable for failures to comply with professional standards.
  • In the second non-independence case against a major audit firm since 2009, charged Grant Thornton LLP, which admitted wrongdoing, and two of its partners, with ignoring red flags and fraud risks while conducting deficient audits of two publicly traded companies that the SEC had separately charged with improper accounting and other violations.
  • Brought important actions against auditing firms for violating auditor independence rules, including two Grant Thornton firms and Ernst & Young LLP.
  • Charged a private fund administrator with missing or ignoring clear indications of fraud while it was contracted to keep records and prepare financial statements and investor account statements for two client funds that the SEC charged with fraud.
  • Sanctioned a consultant to a Texas-based oil company based on charges that he improperly evaluated the severity of the company’s internal control deficiencies (in addition to charges against the company, senior executives, and an outside auditor).
  • Charged lawyers with allegedly offering EB-5 investments while not registered to act as brokers.

Enforcing fairness among market participants

  • Sanctioned Barclays Capital Inc. and Credit Suisse Securities (USA) LLC for violating the federal securities laws while operating alternative trading systems (ATSs); Barclays admitted wrongdoing and agreed to pay a US$35-million penalty – the largest penalty ever assessed against a dark pool – and Credit Suisse agreed to pay over US$54-million in monetary sanctions, representing the largest overall settlement against an ATS.
  • Sanctioned Merrill Lynch for violations of the Market Access Rule, which requires firms to have adequate risk controls in place before providing customers with access to the market and imposed the largest penalty ever assessed in a Market Access Rule case (US$12.5 million).
  • Imposed a US$1-million penalty on Morgan Stanley Smith Barney LLC for the firm’s failure to adopt written policies and procedures reasonably designed to protect customer records and information.

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Finding insider trading schemes

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Uncovering misconduct by advisers and their companies

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Fighting market manipulation and microcap fraud

  • Suspended trading in the securities of 199 issuers in order to combat market manipulation and microcap fraud threats to investors, including 19 issuers arising from a microcap fraud-fighting initiative known as Operation Shell-Expel.
  • Obtained a court order freezing the profits of a foreign trader who allegedly manipulated the stock of a Silicon Valley technology firm through a false EDGAR filing traced to a computer in Pakistan.
  • Obtained an emergency court order to freeze the assets of a United Kingdom resident charged with allegedly intruding into the online brokerage accounts of U.S. investors to make unauthorized stock trades that allowed him to profit on trades in his own account.
  • Charged several alleged perpetrators behind a US$78-million pump-and-dump scheme involving the stock of Jammin’ Java, a company that operates as Marley Coffee.
  • Charged proprietary trading firm Briargate Trading LLP and one of its co-founders with engaging in a manipulative trading strategy known as “spoofing.”
  • Sanctioned three traders for two fraudulent trading schemes involving the mismarking of option orders to obtain execution priority and avoid transaction fees charged by options exchanges and “spoofing” to generate liquidity rebates from an options exchange.

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Combating fraud and enhancing issuer disclosure

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Halting international and affinity-based frauds

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Policing the markets

Cracking Down on misconduct involving complex financial instruments

  • Sanctioned credit rating agency DBRS Inc. for misrepresenting its surveillance methodology for ratings of certain complex instruments.

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Combating foreign corrupt practices

Protecting whistleblowers

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Pursuing admissions of wrongdoing

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Won five U.S. District Court jury or bench trials in fiscal year 2016. Obtained favorable jury verdicts in the following cases:

  • Nan Huang was found liable for illegally insider trading on information he obtained while working as a data analyst for credit card issuer Capital One.
  • Former stock brokers Daryl Payton and Benjamin Durant were found liable for insider trading ahead of a US$1.2-billion acquisition of SPSS Inc. by IBM Corporation.
  • Stephen Ferrone, the former CEO of biopharmaceutical company Immunosyn Corp., was found liable for fraudulently misleading investors about regulatory approval of the company’s sole product, and for signing and filing false certifications included with Immunosyn’s annual and quarterly reports.
  • The City of Miami and its former budget director Michael Boudreaux were found liable for multiple counts of antifraud violations of the federal securities laws in connection with the city’s disclosures concerning the deteriorating financial condition of the city during 2007 and 2008 and in three separate offerings of municipal securities in 2009.

Enforcement Results: Fiscal Years 2014-2016

Source: SEC