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Regulation and Compliance > Federal Regulation > SEC

SEC Brought ‘Record’ 755 Enforcement Actions in 2014

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The Securities and Exchange Commission filed a “record” 755 enforcement actions and obtained orders totaling $4.16 billion in disgorgement and penalties in fiscal 2014, according to preliminary figures released by the agency on Thursday.

The fiscal 2014 figures compare to fiscal 2013, when the Commission filed 686 enforcement actions and obtained orders totaling $3.4 billion in disgorgement and penalties. In FY 2012, the Commission filed 734 enforcement actions and obtained orders totaling $3.1 billion in disgorgement and penalties.

“Aggressive enforcement against wrongdoers who harm investors and threaten our financial markets remains a top priority, and we brought and will continue to bring creative and important enforcement actions across a broad range of the securities markets,” said SEC Chairwoman Mary Jo White, in a statement. “The innovative use of technology – enhanced use of data and quantitative analysis – was instrumental in detecting misconduct and contributed to the Enforcement Division’s success in bringing quality actions that resulted in stiff monetary sanctions.”

The agency noted that additional data on the SEC’s fiscal 2014 enforcement results will be available as part of the SEC’s upcoming Agency Financial Report.

Indeed, Andrew Ceresney, the SEC’s enforcement chief, said Tuesday at Securities Docket’s Securities Enforcement Forum in Washington that the agency will continue to bring cases in the new fiscal year against investment advisors in numerous areas — including regarding their misrepresentation of investment objectives, undisclosed conflicts of interest, adequacy of compliance programs, performance advertising as well as investment advisor fees.

He also listed the “long list” of “first-ever” cases the agency brought in the past year, which included the market access rule violation case against Wedbush Securities, the whistleblower retaliation case against Paradigm Capital, as well as the first investment advisor pay-to-play rule violation.

Ceresney noted insider trading will continue to be a “major focus” for the agency and that his division will also focus in the next fiscal year on private equity fees and expenses and has “upped its focus” on microcap fraud and pyramid schemes.

Ceresney added that the agency used big data in FY 2014 “in ways we hadn’t before” to investigate misconduct and bring cases the agency once could not. The agency also showed that it “could get admissions” of guilt in certain cases.

As to the enforcement division’s use of big data, Ceresney said that the agency has “access to data that we didn’t have access to five to 10 years ago,” such as evaluating patterns in blue sheet data regarding trading.

In FY 2014, the SEC’s whistleblower program awarded nine whistleblowers with total awards of approximately $35 million.

Daniel Hawke, head of the SEC’s Market Abuse Unit, said at the Securities Docket conference that whistleblowers have helped the agency detect anomalies in trading desk operations, such as “mark-ups or mark-downs” being passed on to clients. “To have someone come forward saves resources and helps us focus on where the bad conduct is,” he said.

Hawke noted that he has been “impressed by the quality” of the whistleblower tips.

“I think the quality of the information that we get, and [that] someone is an eye witness to the conduct, makes a huge difference in how we shape and drive our investigations.”

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