SEC Settlement Trends: 2H12 Update

Mon Jan 14 15:24:38 EST 2013
By Jorge Baez and Dr. James Overdahl with former NERA economist Dr. Elaine Buckberg

The latest report from NERA's ongoing analysis of trends in Securities and Exchange Commission (SEC) enforcement action settlements finds that settlements with the SEC continued their upward trajectory, reaching 714 in fiscal year 2012 (FY12), the highest number since 2007. 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. 

The authors note that 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 authors also find that 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.

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.