Scarinci Hollenbeck, LLC
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Author: Scarinci Hollenbeck, LLC
Date: November 23, 2018
The Firm
201-896-4100 info@sh-law.comThe Securities and Exchange Commission’s (SEC) enforcement division recently published its second annual report. Because it highlights where the Division of Enforcement is focusing its enforcement-related efforts, the report serves as a valuable compliance resource and should be mandatory reading material for professionals whose businesses fall under the SEC’s purview.
Importantly, the five Principles established in the FY 2017 Annual Report will continue to be followed. These Principals are: Focus on Main Street Investor, Focus on Individual Accountability, Keep Pace with Technical Change, Impose Remedies that Further Goals of Enforcement, Assess Resource Allocation.
In Fiscal Year 2018, the SEC brought 821 enforcement actions, including 490 stand-alone actions. The agency obtained judgments and orders totaling more than $3.945 billion in disgorgement and penalties and also recouped $794 million on behalf of harmed investors. A large majority (63 percent) of the SEC’s stand-alone cases involved investment advisory issues, securities offerings, and issuer reporting/accounting and auditing.
“As stewards of the SEC’s Division of Enforcement, our goal is to continue to protect investors, deter misconduct, punish wrongdoers and keep our markets the safest and strongest in the world,” Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement, said in a press statement. “This year’s report again shows a broad range of significant enforcement actions, a thoughtful approach to remedies and relief, and the return of substantial sums to investors,” added Steven Peikin, Co-Director of the SEC’s Enforcement Division.
Noteworthy Enforcement Actions are highlighted on pages 15-18 of the Annual Report, and the Summary Chart is an effective tool for the industry and defense counsel.
The SEC Division of Enforcement’s Annual Report revealed several key trends briefly summarized here:
Finally, the annual report also notes that the Division of Enforcement has been forced to do more with less. The Division’s total headcount is down approximately 10 percent from its peak in FY 2016. To more effectively allocate its resources, the SEC is prioritizing market segments presenting emerging risks, including cyber threats and ICOs. The Enforcement Division is also more focused on opening and pursuing investigations that are likely to have the most meaningful impact for investors and the integrity of markets.
Given the growing divide between appellate courts, the U.S. Supreme Court may ultimately decide whether a party can contractually waive the right to arbitrate before FINRA without express language in the agreement. Additionally, more explicit contract draftsmanship in customer agreements could play a role in future decisions. The Scarinci Hollenbeck Business Law and Litigation Practice Group will continue to follow this issue and post updates as they become available.
If you have any questions or would like to discuss the matter further, please contact me, Paul Lieberman, at 732-586-8366.
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