SEC Enforcement got mixed results yesterday. There was an appearance before Judge Rakoff at the hearing on the proposed settlement of its Citigroup case. That action is one of its most important market crisis cases (here). There was also the release of statistics detailing the results of last year’s enforcement efforts. Those statistics are for the first full year since the historic reorganization of the division.
First there is Citigroup. Whether the court will accept the proposed settlement in that case is still unclear. After denying a motion to intervene by a public interest group that proposed to object to the settlement terms, Judge Rakoff convened a hearing and closely questioned the parties according to a report by Reuters. One exchange centered on the request for an injunction as part of the settlement. After noting that the SEC has other injunctions against Citigroup, the court reportedly commented that the injunction is just “for show.”
The hearing concluded with Judge Rakoff stating that he would write an opinion. It is unclear if that opinion will simply detail the court’s concerns and approve the settlement or perhaps pose more questions and raise additional issues. Previously, when considering the SEC’s proposed settlement with Bank of America, the parties significantly altered the terms of the deal in response to Judge Rakoff’s concerns before securing approval.
Second, there are the statistics. SEC enforcement faired better here. For fiscal 2011 the Commission filed 735 enforcement actions, the largest number in the history of the Division. In those actions $2.8 billion in penalties and disgorgement was ordered. Key areas of emphasis include:
Market crisis cases. Last year 15 separate actions naming 17 individuals were filed. The defendants included 16 CEOs and CFOs and other senior corporate executives. Over the last two and one half years actions were filed against 81 individuals.
Insider trading. Last year 57 insider trading cases were filed. This represents an 8% increase over the prior year.
Financial fraud and issuer disclosure violations. Last year 89 actions were brought based on these violations.
Regulated entities. During the last fiscal year the Commission brought 146 enforcement actions related to investment advisers and investment companies. This represents a 30% increase over the prior year and is a record for a single year. An additional 112 cases related to broker-dealers, a 60% increase over the prior year.
The Release also highlights the work of the SEC’s Cross Border Working Group, described as a “proactive risk-based initiative focusing on U.S. companies with substantial foreign operations . .. “ Last year the group brought the first ever stop orders for post-effective registration statements due to the resignation of a company’s independent auditor. The group also brought a subpoena enforcement action against Shanghai-based Deloitte Touche Tohmatsu, CPA Ltd. for failing to produce documents.