The report, SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2021 Update, examines data from the Securities and Exchange Commission's Securities Enforcement Empirical Database (SEED). In fiscal year 2021, which ended on September 30, the SEC filed 53 new actions against public companies and subsidiaries. The total for FY 2021 was down 15% from 62 actions in the previous fiscal year and a significant drop from a record-high 95 actions in FY 2019.
"We have seen declines in filing activity after a change of administration in the past. The decrease in actions from FY 2020 to FY 2021, when Gary Gensler took over as the SEC's chair, is consistent with the trends seen in 2013 and 2017, other years in which a new SEC chair was sworn in," said report coauthor Sara Gilley, a Cornerstone Research vice president. "While the SEC has indicated that the number of total enforcement actions increased in FY 2021, we saw a decline in the number of actions against public companies and subsidiaries."
Despite fewer enforcement actions against public companies and subsidiaries, SEC monetary settlements in FY 2021 totaled $1.8 billion, a slight increase from the $1.6 billion total in FY 2020, which was also the average total from FY 2012 to FY 2020. The average monetary settlement was $38 million, up $10 million from the previous fiscal year's average of $28 million. In fiscal year 2021, the median monetary settlement was $1 million, a decrease from previous years.
The SEC reported that 58 percent of public company and subsidiary defendants cooperated in actions settled in FY 2021, a decrease from 62 percent in FY 2020 but consistent with the FY 2012–FY 2020 average. However, the number of defendants who admitted guilt in public company or subsidiary actions has decreased in each of the last two years, from five in FY 2019, to two in FY 2020, and to zero in FY 2021.
"For the first time in 10 years, no public company or subsidiary defendants admitted guilt in FY 2021," said report coauthor Stephen Choi, the Bernard Petrie Professor of Law and Business at New York University School of Law and director of the Pollack Center for Law & Business. "It will be interesting to see if this trend changes, as the SEC recently announced a policy to seek admissions in certain cases as a way to improve the deterrent value of enforcement actions."
In FY 2021, more than half (51 percent) of actions against public companies and subsidiaries involved issuer reporting and disclosure allegations, which had been the most common allegation type in eight of the previous ten fiscal years. The fiscal year 2021 marked the first time that more than half of the SEC's enforcement actions were of the same allegation type.
More Highlights
- The SEC filed administrative proceedings against defendants in 87 percent (46) of cases, compared to 13 percent (seven) in federal court. Six of the seven federal court actions were not resolved concurrently.
- In FY 2021, 40% of defendants who settled had monetary settlements and no cooperation, which was slightly higher than the 37% average from FY 2012 to FY 2020.
- In FY 2021, Foreign Corrupt Practices Act actions accounted for only 8% of all actions against public companies and subsidiaries, the lowest percentage in the years SEED has tracked.
- The SEC filed the first COVID-19-related action against a public company or subsidiary in fiscal year 2021.
- In FY 2021, one action was filed against a SPAC with a public company or subsidiary defendant, the first action against a SPAC in SEED.