SEC Scorecard on Its Financial Crisis Enforcement Actions

SEC Enforcement Actions

The U.S. Securities and Exchange Commission (SEC) recently released an updated tally of its enforcement of credit crisis-related matters—some open, some concluded. With new prosecutions largely behind it, and new leadership at the helm, what we see on the scorecard is largely going to be the SEC’s lasting legacy in how it responded to the 2008 global financial crisis. The scorecard is divided into 4 groups based on the nature of the allegations made. These groups are:

  1. The defendants concealed from investors risks, terms, and improper pricing in CDOs and other complex structured products.
  2. The defendants made misleading disclosures to investors about mortgage-related risks and exposure.
  3. The defendants concealed the extent of risky mortgage-related and other investments in mutual funds and other financial products.
  4. Other

Executives off the Hook?

A key criticism of the SEC has been that it had not taken sufficient actions against individuals, specifically, that it has let too many high-ranking individuals off the hook. The SEC answers this criticism with the first three data points in its scorecard.

SEC Enforcement Actions Taken: Revised Stats (as of May 1, 2013)
Number of Entities and Individuals Charged 157
Number of CEOs, CFOs, and Other Senior Corporate Officers Charged 66
Number of Individuals Who Have Received Officer and Director Bars, Industry Bars, or Commission Suspensions 36
Penalties Ordered or Agreed To > $1.53B
Disgorgement and Prejudgment Interest Ordered or Agreed To > $756M
Additional Monetary Relief Obtained for Harmed Investors $400M
Total Penalties, Disgorgement, and Other Monetary Relief $2.68B

The scorecard shed some light on how much (if any) of the monetary penalties or relief is coming from the individuals, versus their the organizations:

  • Former CEO settled charges by paying $2.45M
  • “the executives also paid penalties”
  • “former CEO and chairman of the board…agreed to pay an $80,000 penalty”
  • Three executives settled charges and paid more than $1.5 million
  • Two executives settled the charges by paying penalties
  • Two executives settled charges and agree to pay more than $1 million
  • Two employees agreed to pay penalties
  • A “former executive agreed to pay a $50,000 penalty”
  • “Five executives agreed to settlements including financial penalties”
  • “The executives agreed to pay financial penalties to settle the SEC’s charges.”

It also indicates that individuals have been hit with industry bars or commission suspensions in slightly more than half of the instances in which senior corporate officers were charged.

No Losers?

Perhaps, not surprisingly, what we do not see in the SEC’s enforcement tally are the matters where the SEC was unsuccessful: where they lost. If one is truly interested in what actions the SEC has taken in the wake of the financial crisis against those who cause or contributed to the crisis, then logically, these actions should be included in the scorecard as well.

With losses allegedly in the trillions and recoveries in the billions, as we wait for the open matters to be concluded, it would seem that critics of the SEC’s enforcement action are still unlikely to be satisfied.

About Ann Longmore

Ann is Executive Vice President of Willis' Executive Risks practice. Based in New York, she has been with the compa…
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