Small-Ball Boosts SEC Enforcement Numbers

The SEC reports it brought 868 enforcement actions in the fiscal year ended September 30, 2016 -- more than ever before, and for the third year in a row. But a Wall Street Journal article this week attributes it to playing "small ball" with little, easily-won cases.

In the Journal's analysis, the SEC's enforcement numbers would have remained relatively flat (up some) if not for the addition of 91 smaller cases under Chair White's "broken windows" mandate. The mandate derives from community policing models (and a 1982 article by political scientist James Q. Wilson) that posit overall lawlessness is more likely to decrease when even the smallest infractions are prosecuted.

FY 2016 enforcement numbers were boosted by neither-admit-nor-deny, no-money, settled actions from the agency's MCDC initiative in which municipal issuers were granted lenient settlement terms for self-reporting their past failures to timely update their public disclosures of financial statements. The MCDC settled actions accounted for 71 of the 91 "broken windows" cases this past year. I discussed the MCDC initiative here.

The SEC's news release touting its enforcement efforts also highlights:

  • Increased actions against investment advisers;
  • Record numbers of Foreign Corrupt Practices Act-related actions;
  • Record amounts distributed to whistleblowers;
  • An action for failure to file a Suspicious Activity Report;
  • Auditor-independence actions; and,
  • The first ever SEC federal-court prosecution of a municipality and its officers.

The SEC's release is here.

The article is J. Eaglesham, SEC Tallies Record By Aiming Small, Wall St. J. at C1 (Oct. 12, 2016).


Thomas K. Potter, III ( is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas and Louisiana. He has over 30 years' experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile.

© 2016 by Thomas K. Potter, III (all rights reserved).

Posted in: SEC
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