The Securities Litigation Expert Blog

SEC and Finra 2012 Enforcement Year in Review

Posted by Jack Duval

Feb 11, 2013 2:34:51 AM

Morgan Lewis has an analysis of the SEC and Finra enforcement actions from 2012.  (ML)  Here's the summaries:

Some of the key (SEC) statistics from FY 2012 are set forth below:

  • The Commission brought 734 enforcement actions, just one case fewer than the 735 initiated in FY 2011.

  • The SEC designated 150 actions as National Priority cases, an increase of approximately 30% from FY 2011.

  • The Commission brought 58 insider trading cases, one more than the prior year.

  • The SEC filed 29 actions related to the financial crisis, up six from the 23 filed in FY 2011, representing a 26% increase from the prior year.

  • Continuing the trend in one of the Commission's principal areas—regulation of broker-dealers, investment advisers, and investment companies—the SEC brought more actions against such regulated entities last year than it did in FY 2011. The Commission initiated 134 actions against broker-dealers, compared to 113 in FY 2011. This represents an approximately 19% increase year-over-year. The SEC also topped the number of actions filed against investment advisers and investment companies, bringing 147 such cases in FY 2012, one more than the record number filed in the previous year. Combined, cases against broker-dealers, investment advisers, and investment companies accounted for 38% of the Commission's FY 2012 enforcement docket.

  • The Commission's Office of the Whistleblower was fully up and running in FY 2012 and received 3,001 tips, complaints, and referrals from whistleblowers in all 50 states and 49 foreign countries. The SEC also made its first award to a whistleblower who helped the Commission stop a fraudulent investment scheme.

Last year, FINRA reported two records in its enforcement program: it brought more disciplinary actions (1,541) and ordered more restitution to investors ($34 million) than ever before. In fact, many of the traditional metrics used to measure FINRA's enforcement activity showed increases from 2011.[4] Highlights from the 2012 statistics[5] are described below:

  • FINRA filed 1,541 new disciplinary actions against firms and individuals, up from 1,488 cases from the prior year—an increase of 3.6% and, as noted, a record since FINRA was established in 2007.

  • FINRA resolved 1,370 formal actions last year; in 2011, it had concluded 1,287 such cases.

  • FINRA expelled 30 firms from its membership (compared to 21 in the prior year), barred 294 people (versus 329 in 2011), and suspended 549 individuals (an increase over the 475 such actions in the prior year).

  • FINRA reported that it had imposed fines of more than $68 million versus almost $63million in the prior year.

  • FINRA ordered firms and individuals to provide more than $34 million in restitution to customers; in 2011, such orders totaled $19million. Again, the 2012 restitution figure was a record and represents an almost 79% increase year-over-year.

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Topics: FINRA, litigation, enforcement, SEC, Morgan Lewis, regulation.

The Ghost of Enron Past? or FERC Comes a Calling

Posted by Jack Duval

Nov 2, 2012 2:26:17 AM

Dealbook, at the New York Times, reports that the Federal Energy Regulatory Commission ("FERC") has launched investigations into many Wall Street firms for manipulating energy markets. (NYT)

The Federal Energy Regulatory Commission, the government watchdog overseeing the oil, natural gas and electricity business, has lately taken aim at three major banks suspected of manipulating energy prices. After taking action against JPMorgan Chase and Deutsche Bank, the agency on Wednesday threatened to impose its largest fine ever against Barclays.

The agency — building on a 2005 law, additional resources and a string of personnel moves — is increasingly exercising its new enforcement muscle to pursue not only energy companies but some of the nation’s biggest banks. Indeed, the case against Barclays, which could cost the British bank $470 million, stems from a broad crackdown on questionable trading that has prompted 19 actions in the last two years.

You may be wondering where FERC came from and the answer is the ashes of the Enron energy market manipulation:
The agency’s effort is rooted in a 2005 law passed in the aftermath of the Enron fraud. The law created an enforcement unit at the agency and gave it the authority to assess hefty fines.

Under the Obama administration, the enforcement unit expanded its ranks and received a nearly 50 percent budget increase.

The unit, which this year created a specialized group to analyze arcane data and detect manipulation, also hired seasoned criminal investigators. The enforcement team is led by Norman C. Bay, the former United States attorney for New Mexico. One of his top deputies is a former general counsel of the Federal Bureau of Investigation.

With fines that large, Compliance can no longer be considered a cost center.


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Topics: energy markets, FERC, New York Times, enforcement, investments, Enron, Compliance, market manipulation, regulation.

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