SEC Settlements Trends: 2H10 Update

Tue Dec 07 15:24:38 EST 2010
By Dr. James Overdahl et al.

The latest report from NERA's ongoing analysis of trends in Securities and Exchange Commission (SEC) enforcement action settlements finds that SEC settlements rebounded sharply in fiscal year (FY) 2010 due to a surge in settlements with individual defendants. According to the report the SEC settled with a total of 694 defendants in the past fiscal year, the highest level since FY2007 and a 14 percent increase over the 611 settlements in FY2009.
Individual settlements in FY2010 were the highest number seen since FY2005 -- increasing to 526, a 25 percent jump over FY2009 settlements of 421. While the number of individual settlements rose, SEC settlements with companies dropped in FY2010 to the second lowest total in any year since the passage of the Sarbanes-Oxley Act (SOX), with 168 compared to 190 in FY2009. The much-publicized $550 million settlement with Goldman Sachs was the highest-value settlement in FY2010 and the third-largest SEC settlement since SOX. While the overall surge in settlements with individual defendants may be interpreted as a shift towards individual accountability, the Goldman Sachs settlement demonstrates that company defendants remain very much at risk of large settlements.
The report's findings are informed by NERA's proprietary database of settlements in SEC enforcement actions, which is based on litigation releases and administrative proceeding documents.