The Securities and Exchange Commission (SEC) have officially released their enforcement actions and the associated fines and penalties for fiscal year 2022. And the result? A staggering $6.4 billion in penalties and disgorgement resulting from 760 SEC enforcement actions. As we wrap FY22, what can registered investment advisers (RIAs) learn from such steep penalties? Accountability is everything.
“As reflected in these results, the Enforcement Division is working with a sense of urgency to protect investors, hold wrongdoers accountable and deter future misconduct in our financial markets,” said Gurbir S. Grewal, Director of the Division of Enforcement. “A centerpiece of those efforts is ensuring that we are using every tool in our toolkit, including penalties that have a deterrent effect and are viewed as more than the cost of doing business. While we set a Commission record this past fiscal year for total money ordered at $6.4 billion, including a record $4.2 billion in penalties, we don’t expect to break these records and set new ones each year because we expect behaviors to change. We expect compliance.”
2022 saw record-breaking enforcement actions and penalties, which highlighted both individual and firm-level accountability. In multiple instances, the SEC sought higher fines and penalties due to the obvious and long-standing prevalence of noncompliance within the firm. However, in cases where cooperation and accountability were noted, the SEC reduced fines, and even, in some cases did not impose fines at all.
In their efforts to protect the public, the SEC “used every tool in their toolkit.” This included data analytics and the ongoing Whistleblower Program. In fact, according to the SEC’s press release on 2022 enforcement actions, “The Division’s Office of Market Intelligence reviewed and triaged more than 38,500 tips, complaints, and referrals of possible securities law violations submitted by the public, self-regulatory organizations, and others.”
The result? Enforcement of SEC penalties and fines in focus areas, including:
- Environmental, social and governance (ESG).
- Private funds.
While FY22 enforcement actions don’t necessarily equate to 2023 SEC Exam Priorities, the SEC has made one thing clear: accountability is a top priority and financial firms who aren’t learning from their peers’ mistakes and adjusting their program to meet compliance requirements will face SEC enforcement actions and penalties in the year to come.
RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.