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- Risk-Based Oversight of Investment Advisors Even if the SEC had a larger budget and more resources, it is doubtful that the Commission would have the resources to regularly examine all RIAs. Therefore, the SEC is likely to continue relying on risk-based oversight to fulfill its mission of protecting investors.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
The Securities and Exchange Commission announced Tuesday that the agency’s enforcement actions in fiscal year 2013 resulted in “a record” $3.4 billion in monetary sanctions ordered against wrongdoers, 10% higher than monetary sanctions ordered in 2012.
However, enforcement actions against both broker-dealers and advisors notched down. The SEC filed 686 enforcement actions in the fiscal year that ended in September. Of those, BDs were hit with 121 actions in 2013 versus 134 in 2012, while the SEC levied 140 actions against advisors this year versus 147 in 2012.
The $3.4 billion in disgorgement and penalties resulting from the actions in 2013 is 10% higher than fiscal 2012 and 22% higher than fiscal 2011, when the SEC says that it filed the most actions in agency history.
“A strong enforcement program helps produce financial markets that operate with integrity and transparency, and reassures investors that they can invest with confidence,” said SEC Chairwoman Mary Jo White, in a statement. “I am incredibly proud of the dedicated and talented women and men of the Enforcement Division. Our results show that we are prepared to tackle the breadth and complexity of today’s securities markets.”
George Canellos, co-director of the SEC’s Division of Enforcement, added in the same statement that, “We are focused on addressing wrongdoing in all corners of the financial industry. Going forward, we will continue to be aggressive but fair in our pursuit of those who violate the securities laws.”
Andrew Ceresney, co-director of the SEC’s Division of Enforcement, added that “numbers tell only a part of the story as we look to bring high-quality enforcement actions that make an impact across the market. We are proud of the terrific results achieved by our hardworking and committed staff and pleased with the strong and robust pipeline of investigations they’ve developed for the year ahead.”
The SEC noted that the Enforcement Division is headed into the next fiscal year “well positioned for significant achievements across its program,” having opened 908 investigations last year (up 13%) and obtained 574 formal orders of investigation (up 20%).
Following are some other highlights as noted by the SEC of its enforcement actions taken in fiscal 2013.
Financial Crisis Enforcement Actions – With several more enforcement cases in FY 2013 against individuals and entities whose actions contributed to the financial crisis, the SEC has now filed enforcement actions against 169 individuals and entities arising from the financial crisis resulting in more than $3 billion in disgorgement, penalties, and other monetary relief for the benefit of harmed investors. The individuals charged include 70 CEOs, CFOs or other senior executives.
Admissions of Guilt – The SEC changed its longstanding settlement policy and now requires admissions of misconduct in cases where heightened accountability and acceptance of responsibility by a defendant are appropriate and in the public interest. The first settlements under the new policy came in actions against Philip A. Falcone and his firm, Harbinger Capital Partners, and JPMorgan Chase & Co.
Whistleblower Tips – The SEC’s Office of the Whistleblower received 3,238 tips in the past year and paid more than $14 million to whistleblowers whose information substantially advanced enforcement actions.
Check out Former SEC Compliance Chief Tells White: Stop Suing Compliance Officers on ThinkAdvisor.