SEC received a record number of whistleblower claims

Register now

The SEC received a record number of whistleblower claims in its most recent fiscal year, a period in which the regulator also brought its highest number of enforcement actions since 2016.

These and other statistics were showcased as part of the SEC’s Division of Enforcement’s annual report, which detailed the agency’s efforts during its fiscal year 2019.

“We are proud of the work enforcement staff did in enabling the SEC to punish misconduct, deter future wrongdoing, and obtain relief for harmed investors,” Steven Peikin, co-director of the enforcement division, said in a statement.
The enforcement division awarded $387 million to 66 whistleblowers for a “job well done,” according to SEC whistleblower attorney Stephen Kohn.

The whistleblower program has led to more than $2 billion in financial remedies since its inception in 2011, the commission says.

Among other highlights, the regulator reported that it returned $1.2 billion to harmed investors, up from $794 million from last fiscal year. The SEC rang up $4.3 billion in disgorgement and penalties, an increase over the $3.9 billion it notched for the prior year, according to the report.

Enforcement actions increased to 862 cases from 821, the report shows.

Among its more notable actions, the regulator ordered Facebook to pay a $100 million penalty as part of a settlement into allegations that misled investors regarding the misuse of user data. The SEC also commissioned actions against financial institutions such as BNY Mellon, JPMorgan Chase and Merrill Lynch for improperly handling “pre-released” ADRs.

The agency issued nearly 600 bars or suspensions against market participants. It also suspended trading in the securities of 271 issuers.

Of the 862 enforcement actions, 526 were standalone actions brought in federal court or administrative proceedings — nearly 7% higher in fiscal year 2019 than fiscal year 2018, where they accounted for 490, according to the report.

The increase is due, in part, to the self-reporting nature and accelerated resolution process of the SEC’s Share Class Selection Disclosure Initiative, according to the report.

As a result of the initiative, 95 investment advisory firms were ordered to return a total of more than $135 million to harmed mutual fund investors — the majority of whom were retail investors.

Launched in fiscal year 2018, the initiative is a voluntary program for investment advisors to self-report to the commission failures to disclose conflicts of interest relating to compensation they received in the form of 12b-1 fees.

The majority of this fiscal year’s actions were brought in March 2019, just over a year after the SEC announced the initiative, with the remainder brought in September 2019.

For reprint and licensing requests for this article, click here.
Regulatory actions and programs Penalties and fines Whistleblower SEC SEC enforcement SEC regulations