The Securities and Exchange Commission (SEC) unveiled its enforcement results for fiscal year 2024, achieving historic financial remedies of $8.2 billion while filing 583 enforcement actions. While the release has tones of a self-promoting puff piece, here is a summary of what the SEC claims it has accomplished in 2024
Overview of SEC Enforcement Actions
Key Statistics from Fiscal Year 2024
The SEC filed 583 enforcement actions, which marked a 26% decline from fiscal year 2023. These actions include:
- 431 stand-alone cases, addressing direct violations of federal securities laws, down 14%.
- 93 follow-on administrative proceedings, representing a 43% decrease.
- 59 cases against issuers failing to meet filing requirements, down 51%.
Despite the reduction in total cases, the SEC’s focus on high-impact enforcement actions resulted in significant financial penalties and enhanced market compliance.
Historic Financial Remedies
Record-High Financial Penalties
The $8.2 billion in financial remedies in FY 2024 consisted of:
- $6.1 billion in disgorgement and prejudgment interest, the highest in SEC history.
- $2.1 billion in civil penalties, the second-highest amount on record.
Major Cases Driving Financial Remedies
A large portion of these remedies stemmed from a jury trial win against Terraform Labs and its founder, Do Kwon, involving one of the largest securities frauds in U.S. history. The case alone resulted in penalties exceeding $4.5 billion.
Proactive Compliance by Market Participants
Fostering a Culture of Compliance
Market participants, including public companies and investment firms, increasingly embraced proactive compliance by:
- Self-reporting securities law violations.
- Remediating compliance failures.
- Cooperating with SEC investigations.
Sanjay Wadhwa, Acting Director of Enforcement, highlighted this trend:
“These efforts not only reduce penalties but also strengthen investor trust in the capital markets.”
Reduced Penalties for Cooperation
In several cases, firms demonstrating proactive compliance received reduced or no civil penalties, reinforcing the SEC’s encouragement of meaningful cooperation.
Key Initiatives Addressing Widespread Noncompliance
Off-Channel Communications
The SEC’s initiative to enforce recordkeeping requirements resulted in:
- $600 million in penalties from more than 70 firms in FY 2024.
- Over $2 billion in total penalties since December 2021.
This initiative targeted broker-dealers, investment advisers, and municipal advisors failing to maintain proper communication records.
Marketing Rule Violations
The SEC charged over a dozen investment advisers for failing to comply with the Marketing Rule, including:
- Advertising hypothetical performance without adequate disclosures.
- Making unsubstantiated claims in promotional materials.
- Using testimonials or third-party ratings without required disclaimers.
Whistleblower Protections
The SEC issued penalties for violations of the Dodd-Frank whistleblower protection rules, including:
- An $18 million penalty against J.P. Morgan, the largest ever for standalone whistleblower rule violations.
Combating Fraud in Emerging Markets
Emerging Technologies and Fraudulent Practices
The SEC focused on fraudulent activities involving new technologies and modern platforms, such as:
Artificial Intelligence (AI) Fraud
- QZ Asset Management: Charged for falsely promoting AI-based investment strategies with guaranteed returns.
- Delphia and Global Predictions: Penalized for misleading statements about their use of AI in investment decisions.
Crypto and Social Media Scams
- Relationship investment scams using fake crypto platforms like NanoBit and CoinW6 were targeted for preying on investors via social media.
Major Fraud Cases
The SEC’s fraud investigations led to significant enforcement actions, including:
- FirstEnergy Corp.: A $100 million penalty for a multi-year political corruption scheme.
- NovaTech Ltd.: Charged for running a fraudulent crypto scheme that raised $650 million from investors.
Investor Protection and Whistleblower Programs
Financial Recovery for Investors
The SEC distributed $345 million to harmed investors in FY 2024, adding to a total of $2.7 billion since FY 2021.
Record Whistleblower Engagement
FY 2024 saw:
- 45,130 tips and complaints received by the SEC, including 24,000 whistleblower tips.
- $255 million in whistleblower awards, underscoring the importance of reporting misconduct.
Enforcement Actions Targeting Individuals
Holding Executives Accountable
The SEC barred 124 individuals from serving as officers or directors of public companies, including:
- Silvergate Capital Executives: Charged for misleading investors about crypto-related compliance issues.
- Cassava Sciences Executives: Penalized for misstatements about Alzheimer’s treatment trials.
Gatekeeper Accountability
Audit firms faced scrutiny, with cases against BF Borgers for auditor independence violations affecting over 1,500 SEC filings.
Addressing Emerging Risks
Cybersecurity Enforcement
Key cybersecurity-related cases included:
- Penalties against NYSE for failing to disclose cyber intrusions.
- Charges against Equiniti Trust Company for failing to protect client funds.
Crypto Compliance Violations
The SEC charged several crypto-focused firms, such as Silvergate Capital, for misleading investors about compliance efforts in monitoring high-risk customers like FTX.
Market Integrity and Emerging Risks
Market Abuse Investigations
The SEC used advanced analytics to uncover market abuses, such as:
- Insider trading cases involving nonpublic information.
- Fraudulent schemes exploiting material nonpublic information (MNPI).
Misleading Statements by Public Companies
Public companies like Cassava Sciences and Ideanomics faced enforcement actions for misleading investors about financial performance or clinical trial results.
Litigation Success and Record Outcomes
High-Stakes Trial Wins
The SEC achieved favorable outcomes in multiple trials, including:
- Terraform Labs: A jury found the defendants liable for fraud, leading to over $4.5 billion in penalties.
- SEC v. Panuwat: The first trial addressing insider trading in a peer company resulted in a guilty verdict.
The SEC’s record-breaking financial penalties and proactive initiatives in fiscal year 2024 reflect its unwavering commitment to investor protection, market integrity, and regulatory enforcement.
Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.
He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page - SECLaw.com, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.
