Securities Enforcement 2014 Year-End Review

1. Introduction

Fiscal year 2014 proved to be another eventful and record-breaking year for the Division of Enforcement (Enforcement Division) of the United States Securities and Exchange Commission (SEC or the Commission). Indeed, the Commission recently described the fiscal year that ended in September (i.e., FY2014) as a "very strong year" for enforcement, and by certain measures it certainly was.1 This description of the SEC's performance and approach, however, is not without controversy as various aspects of the SEC's enforcement approach have been criticized in some quarters, including by certain of the SEC's own commissioners.

In FY2014, as illustrated, the SEC filed 755 enforcement actions, an all-time record. This means that the SEC filed 69 more enforcement actions in FY2014 than in FY2013 (when it filed 686 actions) and 21 more actions in FY2014 than in FY2012 (when it filed 734 actions). The increase reflects the continued implementation of SEC Chair Mary Jo White's controversial "Broken Windows" enforcement philosophy.

The breakdown of cases among the Enforcement Division's enumerated subject matter areas remained relatively stable in FY2014. Five categories of SEC actions showed an increase in year-over-year filings. Cases related to issuer reporting and disclosure increased significantly in FY2014, up 45% when compared to FY2013. Cases related to market manipulation and broker-dealers also increased 26% and 37%, respectively. Insider trading cases increased by 18%, while FCPA cases increased from five to seven in total, a 40% increase. Meanwhile, some categories of cases decreased, with the number of enforcement actions related to delinquent filings and securities offerings experiencing the steepest declines at 19% and 9%, respectively. Cases involving investment advisors also declined by 7%, dropping from 140 to 130 in total.

Among the 755 enforcement actions filed in FY2014 were numerous first-ever cases. For example, in February, the SEC filed its first enforcement action against a private equity firm regarding allocation of fees and expenses.2 In June, the SEC brought its first-ever enforcement action under the anti-retaliation provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) against a hedge fund that allegedly retaliated against a whistleblower.3 Additionally, in September, the SEC brought its first enforcement action against a broker-dealer for failing to protect a client's...