SEC enforcement actions against public companies and subsidiaries rose again in FY 2023, with 91 new actions filed, the third highest of any fiscal year in SEED. Although filings increased, total monetary settlements fell to $1.3 billion, the lowest level in the last eight fiscal years. FY 2023 settlements were also characterized by above-average rates of cooperation noted (69% of defendants) and admissions of guilt (16% of defendants).

Findings on public company and subsidiary defendants are based on data from the Securities Enforcement Empirical Database (SEED), a collaboration between the NYU Pollack Center for Law & Business and Cornerstone Research. SEED data cover FY 2010 through the present.

Public companies are defined as those that traded on a major U.S. exchange as identified by the Center for Research in Security Prices (CRSP) at the time the enforcement action was initiated or within the five-year period preceding the initiation.

Filings

• The SEC filed 91 actions against public companies and subsidiaries in FY 2023, a 34% increase over the prior fiscal year.
• Multiple SEC sweeps throughout the fiscal year and a near record-setting number of actions in a single month (31 actions in September 2023) contributed substantially to the total.
• The percentage of public company and subsidiary actions brought as administrative proceedings increased slightly to 92% in FY 2023.

Allegations

• Actions involving Issuer Reporting and Disclosure allegations reached 41, the highest number of any fiscal year in SEED. These accounted for 45% of actions filed in FY 2023 and more than 1.5 times as many actions as in FY 2022.
• Broker Dealer allegations remained relatively high at 19% of actions, while Investment Adviser/Investment Company allegations declined to 7% of actions filed in FY 2023.

The increase in actions coincided with above average levels of cooperation. Of the cooperating defendants, 20% were charged as part of the SEC’s sweep for off-channel communications recordkeeping failures.

Stephen Choi
Bernard Petrie Professor of Law and Business
Director of the Pollack Center for Law & Business
New York University

Settlements

• The SEC noted cooperation by 69% of public company and subsidiary defendants that settled in FY 2023, surpassing the FY 2014–FY 2022 average of 61%.
• Total monetary settlements imposed in public company or subsidiary actions in FY 2023 declined to $1.3 billion, the lowest total since FY 2015.
• The average monetary settlement amount imposed in FY 2023 declined to $15 million per action, although the median amount of $4 million per action remained generally consistent with the median of prior fiscal years.
• Disgorgement and prejudgment interest accounted for 41% of the total monetary settlements imposed, which was lower than the FY 2014–FY 2022 average of 52%.
• In FY 2023, 16 public company or subsidiary defendants had an admission of guilt, matching the record-high total number of admissions in FY 2022.
• All but one of the defendants with admissions of guilt in FY 2023 were facing Broker Dealer allegations.

The views expressed herein are solely those of the authors and do not necessarily represent the views of Cornerstone Research.