White Collar

SEC's 2023 Annual Enforcement Report: A Year of Vigorous Pursuit and Record Awards

By: Lucosky Brookman
SEC's 2023 Annual Enforcement Report: A Year of Vigorous Pursuit and Record Awards

On November 14, the Securities and Exchange Commission (SEC) released its highly anticipated 2023 annual enforcement report, showcasing another year of robust enforcement activity. The report unveils staggering financial sanctions, a surge in whistleblower tips, and a continued focus on key industry issues. Lucosky Brookman brings you an in-depth analysis of the SEC's latest enforcement efforts and their implications for public companies and executives.

In 2023, the SEC flexed its regulatory muscles by imposing a remarkable $4.95 billion in financial sanctions, marking the second-highest amount in the Commission's history. This figure closely follows the record-setting numbers of the previous year, solidifying the SEC's commitment to holding bad actors accountable.

Within the $4.95 billion total, $3.37 billion was attributed to disgorgement, a significant increase from $2.245 billion in 2022. Civil penalties amounted to $1.58 billion, a slight decrease from the previous year's record-setting $4.19 billion. Both disgorgement and civil penalties reached the second-highest amounts in SEC history, underscoring the Commission's dedication to financial accountability. 

The SEC filed a total of 784 enforcement actions in fiscal year 2023, reflecting a 3 percent increase from the previous year. Notably, the 8 percent uptick in standalone enforcement actions, totaling 501, represents the highest numbers since fiscal year 2019. Sanjay Wadhwa, Deputy Director of the Division of Enforcement, attributes these increases to a staff that remains committed to the SEC's investor protection mandate.

The SEC employed various initiatives to proactively address industry issues, including the EPS Initiative. This initiative monitors issuer financial metrics to identify potential manipulators of publicly disclosed earnings per share. The enforcement actions related to issuer reporting or accounting and auditing issues saw a significant increase, emphasizing the SEC's commitment to market integrity.

The SEC's 2023 enforcement report highlights the increasing priority placed on regulating crypto markets. SEC Director of Enforcement, Gurbir Grewal, identifies crypto markets as the "perfect storm of investor risk." This shift reflects the SEC's proactive stance in adapting to emerging challenges and protecting investors in rapidly evolving financial landscapes.

The whistleblower program emerged as a powerful tool in 2023, receiving a record number of tips and issuing a record amount of awards. Whistleblower awards reached nearly $600 million, a substantial increase from $229 million in 2022. The program's success underscores its critical role in incentivizing individuals to come forward with valuable information.

Approximately two-thirds of the SEC's cases in fiscal year 2023 involved charges against individuals, reinforcing the Commission's commitment to holding individuals accountable for securities law violations. This resulted in 133 orders barring future service as officers and directors of public companies, the highest number in a decade.

The SEC's 2023 enforcement report reflects the agency's continued emphasis on being the "cop on the beat" under the leadership of Chair Gary Gensler. As we enter fiscal year 2024, public companies and executives must prioritize proactive compliance with SEC rules and regulations to avoid becoming enforcement targets. The SEC's unwavering dedication to investor protection and market integrity sets the stage for another year of vigorous enforcement actions.

Lucosky Brookman remains committed to keeping you informed on the latest developments in securities regulation and enforcement. Stay tuned for further insights and analysis as we navigate the evolving landscape of regulatory compliance.