|[January 14, 2013]
NERA Releases 2012 Fiscal Year-End SEC Settlement Trends Report
NEW YORK --(Business Wire)--
Settlements with the Securities and Exchange Commission (SEC (News - Alert)) continued
their upward trajectory, reaching 714 in fiscal year 2012 (FY12), the
highest number since 2007, according to NERA Economic Consulting's
biannual report SEC Settlement Trends: 2H12, released today.
This increase in total settlements represents a 6.6% increase over the
670 SEC settlements in fiscal year 2011 (FY11). The total number of
settlements with individuals in FY12 reached the highest level recorded
since 2005, with 537-up 14% from 473 in FY11.
FY12 Trends in Settlement Values
Median settlement values for companies declined to $1 million in FY12
from the $1.4 million observed in FY11. Consistent with the SEC's
emphasis on individual accountability, median settlement values for
individuals reached a post-Sarbanes Oxley ("SOX") high in FY12, having
more than doubled since 2009 from $103,000 to $221,000.
The percentage of SEC settlements in FY12 that had an attached monetary
penalty increased to 69%, above the 57% rate in FY11 and the average
rate of 59.5% between 2003 and 2010. SEC settlements against companies
involving a monetary payment increased to more than three-quarters of
all settlements in FY12, up from 62% in FY11 and a 56% average rate from
2003 and 2010.
FY12 Settlement Allegation Trends
Settlements for several categories of allegations reached new highs in
FY12. The SEC reached a record number of insider trading settlements in
FY12, with 118 individuals and eight companies. These 126 settlements
are almost double the total number of FY11 settlements and 21% more than
the previous post-SOX record of 104 insider trading settlements in 2003.
Settlements involving allegations of misrepresentation and
misappropriation by financial firms also hit a post-SOX record high in
FY12, with 208 total cases. For the third year in a row, the number of
total settlements for allegations of Ponzi schemes reached a post-SOX
record, with 92 settlements. Finally, settlements for trading violations
hit a post-SOX record in FY12, almost doubling the number of settlements
from the previous year to 48.
Schapiro Years - SEC Enforcement Actions
Chairman Mary Schapiro stepped down from the SEC on 14 December 2012. In
addition to the FY12 data, Trends authors also compared
settlement trends in SEC enforcement during the period of Chairman
Schapiro's appointment and the proceeding years since the passage of SOX.
The annual average number of SEC settlements declined from 751 in the
"pre-Schapiro era" to 680 during the "Schapiro era" at the SEC. The
decline was observed in settlements with both companies and individuals.
However, using settlement data from the entire pre-Schapiro era obscures
the fact that the Schapiro-era average of 680 settlements per year is
virtually unchanged from the average of 682 settlements per year
observed in the three years immediately prior to the Schapiro
Notably, there was a considerable shift in the focus of enforcement
actions under Chairman Schapiro compared to the previous post-SOX
period. Insider trading settlements in 2012 jumped to 126, far exceeding
the average 71 settlements per year observed prior to her tenure.
Average annual settlements with companies on matters related to Ponzi
schemes increased substantially from 47 to 79 cases during the Schapiro
era. Enforcement of the FCPA under Schapiro remained relatively stable
compared to the years immediately prior to her chairmanship, with an
average of 18 settlements per year during her tenure versus the average
of 17 between 2007-2008.
SEC monetary settlements under Chairman Schapiro rose for both companies
and individuals. Median settlement values for individuals increased
nearly 40% to $152,667, a result consistent with an increased focus by
the SEC on individual accountability. Company settlements at the median
rose from $993,542 to $1,075,000.
"During the Schapiro era, the Dodd-Frank Act gave the SEC expanded
authority and expanded the range of market participants subject to SEC
registration, oversight, and enforcement. The actions taken during the
Schapiro era to implement Dodd-Frank will likely be an important
contributor to the legacy of the Schapiro era," said NERA Vice President
Dr. James Overdahl.
SEC Settlement Trends Report Series
NERA has developed a proprietary database of settlements and judgments
in SEC enforcement actions since SOX by reviewing every litigation
release and administrative proceeding document published since 21 July
2002. You can download the latest report, SEC Settlement Trends: 2H12,
and find historical SEC settlements data and previous SEC settlements
trends reports at http://www.nera.com/67_7974.htm.
This report is authored by NERA Senior Vice President Dr. Elaine
Buckberg, Vice President Dr. James A. Overdahl, and Senior Consultant
NERA Economic Consulting (www.nera.com)
is a global firm of experts dedicated to applying economic, finance, and
quantitative principles to complex business and legal challenges. For
half a century, NERA's economists have been creating strategies,
studies, reports, expert testimony, and policy recommendations for
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