The SEC imposed the highest amount ever of civil penalties and ordered the most monetary punishment for violations of securities laws during the last fiscal year, the agency announced Tuesday.
The Securities and Exchange Commission reported that it collected $4.2 billion in fines in fiscal year 2022, the most in its history and more than the past three fiscal years combined. It also set a record with $6.4 billion in total money ordered from enforcement actions, which includes civil penalties, disgorgement and prejudgment interest.
The enforcement statistics covered activity from Oct. 1, 2021, through Sept. 30. During that time, the SEC filed 760 total enforcement actions, a 9% increase over fiscal 2021.
The agency’s aggressive enforcement was meant to increase the heat on financial firms, advisers and other entities who break the rules.
“This past fiscal year, we sought to recalibrate penalties to more effectively promote deterrence,” SEC enforcement director Gurbir Grewal said Tuesday at the Securities Enforcement Forum in Washington.
Grewal, who took over the helm of the division last year, said the punishment for wrongdoing must be sufficiently painful financially to stop the activity and send a message to the rest of the industry.
“If market participants think that getting fined by the SEC is just another expense to be priced into the cost of doing business, then penalties are neither effective punishment nor deterrence,” he said. “Market participants must realize that complying with the securities laws is cheaper than violating them.”
The SEC ordered disgorgement of $2.2 billion of ill-gotten gains in fiscal 2022, a 6% decrease from the previous fiscal year. But for the first time, the SEC imposed twice as much in civil penalties as it sought in disgorgement. It is another example of the SEC’s deterrence effort, Grewal said.
“This increased penalty-to-disgorgement ratio demonstrates that the risk-reward calculation is not what it was just a few years ago,” he said.
The SEC took the most enforcement actions — 174 — against misconduct by investment advisers and investment companies, which accounted for 23% of total actions. Broker-dealers were the target of 132 actions, or 17% of the total. Another 17% of enforcement actions involved delinquent filings.
The SEC cited as an example of deterrence the $1.2 billion in penalties it imposed on JP Morgan Securities, 15 other broker-dealers and one investment adviser for “widespread and longstanding failures” to track and preserve work-related text messages on employees’ personal devices. In addition to the fines, the SEC obtained admissions of guilt from all 17 firms.
The agency emphasized its efforts to crack down on the misuse of complex products and strategies by highlighting the charges it brought against UBS for fraud related to its Yield Enhancement Strategy. The firm reached a $25 million settlement.
Thirty four percent of advisors surveyed by InvestmentNews say they use direct indexing strategies but 39 percent don’t.
“This is on the B. Riley Securities side of the business, the dealmaking side,” one senior industry executive said.
There are three essential elements you must bring to the table to increase the chances of a successful post-sale career.
Across generations, how are savers doing with their 401(k) contributions?
New report shines some light on today's billionaires' investments.
"Synth Equity has been such a tailwind for these advisors who really understand the story," Measured Risk Portfolios’ head of distribution said.
Streamline your outreach with Aidentified's AI-driven solutions
