The volume of enforcement actions against public companies by the U.S. Securities and Exchange Commission (SEC) declined in fiscal 2024, but total monetary settlements rose, according to new research.
A report from Cornerstone Research and the NYU Pollack Center for Law & Business noted that the SEC brought 80 enforcement actions against public companies last year. That’s down 12% from the previous year, but is about 5% higher than the historical average.
While the number of cases was lower than the previous year, the magnitude of monetary settlements rose to US$1.5 billion in fiscal 2024, up from US$1.3 billion in fiscal 2023, it said.
According to the report, the SEC carried out several compliance sweeps that generated a significant share of its enforcement activity.
For instance, the regulator targeted the use of “off-channel communications,” such as private texting and WhatsApp, which generated a flurry of activity against brokerage firms and other industry players.
As a result, allegations against broker-dealers accounted for 29% of enforcement activity during the year, up from 19% in the previous year, the report noted.
Additionally, the regulator brought seven actions for alleged violations of whistleblower protections during the year, up from three cases in fiscal 2023, it said.
Alongside the focus on texting and protecting whistleblowers, “We also saw a focus on cooperation and non-monetary settlements, as the agency prioritized efficiency and cooperation in its enforcement approach,” said Stephen Choi, co-author of the report and a law professor at NYU, in a release.
The report noted that 75% of public company defendants settled the actions against them, and a record 34 of these settlements included admissions of guilt.
“SEC officials have emphasized that admissions of guilt are a powerful accountability measure,” added Sara Gilley, co-author and co-head of Cornerstone Research’s securities litigation practice.