SEC Settlements: A New Era Post-SOX
10 November 2008
Visit NERA's new website, http://www.securitieslitigationtrends.com/, for additional statistics and analysis, as well as a searchable database of documents relating to SEC settlements.
Securities and Exchange Commission (SEC) enforcement action settlements are projected to reach a three-year high in 2008, continuing a dynamic period of SEC enforcement since the enactment of Sarbanes-Oxley (SOX) in 2002, according to a new NERA study. The study provides an overview of trends NERA has identified in the number of settlements and settlement values in the six years since the passage of SOX. NERA experts have developed a proprietary database of settlements in SEC enforcement actions, by reviewing every litigation release and administrative proceeding document published from 31 July 2002 through 30 September 2008.
Among its findings, "SEC Settlements: A New Era Post-SOX" projects that the SEC is on pace to reach 739 settlements by year-end 2008. This marks the second straight year of increased settlement activity, with 702 settlements in 2007 and 663 in 2006.
Other findings of NERA's study include:
- The number of settlements with individuals is on the rise, projected to reach 568 for the year. Company settlements, on the other hand, are declining, and are projected to total just 171 by year-end, which would be the lowest number in any full year since SOX.
- 56% of SEC settlements with company defendants since SOX have included monetary penalties.
- In 2007, the median company settlement dropped to $0.7 million, less than half the 2006 high of $1.5 million.
- 43% of company payments have been in the form of disgorgement, and 57% in the form of civil penalties; for individuals, disgorgement penalties account for 88% of payments.
- Insider trading is the most frequent allegation in SEC settlements for individuals; NERA projects 92 settlements with individuals will occur in 2008, compared to 52 in 2007.
