Cornerstone Research, NYU Report: SEC Enforcement Actions against Public Companies Decrease Substantially

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Decline coincides with changes in SEC leadership

The U.S. Securities and Exchange Commission filed 33 percent fewer enforcement actions against public companies and their subsidiaries in fiscal year 2017. This decline coincided with changes in SEC leadership, according to a report issued jointly by the New York University Pollack Center for Law & Business and Cornerstone Research.

The report, SEC Enforcement Activity: Public Companies and Subsidiaries, Fiscal Year 2017 Update, analyzes data from the Securities Enforcement Empirical Database (SEED).

In FY 2017, the SEC filed 62 new enforcement actions against public companies and their subsidiaries, compared to 92 actions in FY 2016. There were 45 actions filed in the first half of FY 2017 but only 17 in the second half.

“The data from SEED show a substantial decline in public company-related enforcement actions, the timing of which corresponds with SEC leadership changes in the new administration,” said Stephen Choi, the Murray and Kathleen Bring Professor of Law at the NYU School of Law and director of the Pollack Center for Law & Business. “For example, only two actions with FCPA allegations have been filed against public company-related defendants since February.”

“We also saw major decreases in monetary penalties,” noted David Marcus, senior vice president and head of Cornerstone Research’s finance practice. “Total settlements declined from $1 billion in the first half of FY 2017 to $196 million in the second half.”

Highlights:

  •     Actions against companies in the Finance, Insurance, and Real Estate industry division accounted for 42 percent of all public company-related actions in FY 2017, the highest percentage for any industry.
  •     In FY 2017, 98 percent of public company-related actions (61 of 62 actions) resolved on the same day they were initiated. The FY 2010 – FY 2016 median was 90 percent.
  •     Issuer Reporting and Disclosure remained the most common type of allegation in FY 2017, accounting for 39 percent of actions against public companies.
  •     Between the first half and second half of FY 2017, the percentage of public company-related defendants that cooperated with the SEC declined from 63 percent to 32 percent.

Additional findings on SEC enforcement actions against public company-related defendants are available in the report.

About the Securities Enforcement Empirical Database (SEED)
The Securities Enforcement Empirical Database (SEED) tracks and records information for SEC enforcement actions filed against public company defendants. Created by the NYU Pollack Center for Law & Business in cooperation with Cornerstone Research, SEED facilitates the analysis and reporting of SEC enforcement actions through regular updates of new filings and settlement information for ongoing enforcement actions.

About the NYU Pollack Center for Law & Business
Established in 1997, the NYU Pollack Center for Law & Business is a joint venture of the NYU School of Law and the Stern School of Business. Its mission is to enrich the teaching curriculum at both schools in areas where law and business intersect; to facilitate professional interaction and academic research by faculty who share an interest in the structure, regulation, and function of the market economy; and to contribute to the public welfare by supporting scholarship that assists governmental and private policymakers in their pursuit of enhanced business productivity.

About Cornerstone Research
Cornerstone Research provides economic and financial consulting and expert testimony in all phases of complex litigation and regulatory proceedings. The firm works with an extensive network of prominent faculty and industry practitioners to identify the best-qualified expert for each assignment. Cornerstone Research has earned a reputation for consistent high quality and effectiveness by delivering rigorous, state-of-the-art analysis for over 25 years. The firm has 700 staff and offices in Boston, Chicago, London, Los Angeles, New York, San Francisco, Silicon Valley, and Washington.

Twitter at @Cornerstone_Res

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