2024 SEC Enforcement Results
SEC Releases
Introduction
The SEC has released their enforcement results for fiscal year 2024. This year was a record-setting year for financial penalties and remedies.
As SEC Chair, Gary Gensler’s tenure comes to a close in January, compared to former SEC Chair, Jay Clayton, we have seen a marginal difference in the number of enforcement actions throughout their tenures; however, the monetary number of fines (in billions) have nearly doubled during Gensler’s time.
2024 vs 2023 Enforcement Comparison
- Financial Remedies
- Total remedies increased 65.5% compared to 2023. ($8.2 billion vs $4.9 billion in 2023).
- Disgorgements increased 80.8% compared to 2023 ($6.09 billion vs $3.37 billion in 2023).
- Civil Penalties increased 33% ($2.1 billion vs $1.58 billion in 2023).
- Whistleblower rewards totaled $255 million ($600 million in 2023).
- Enforcements
- 583 Total actions, a 26% decline from the previous year.
- 431 “stand alone” enforcements, a decrease of 14%.
Key 2024 Enforcement Areas
- Technology
- Artificial Intelligence (“AI”) Charges for:
- False and misleading statements about the use of AI in an investment process.
- False claims about the use of “proprietary AI-based technology” and “promising 100% protection for client funds”.
- Cybersecurity Charges for:
- Failing to provide timely notification to the SEC of cyber intrusions.
- Not ensuring that client securities and Funds are protected leading to millions of dollars in losses.
- Disclosure and internal control failures related to cybersecurity incidents.
- Artificial Intelligence (“AI”) Charges for:
- Off-Channel Communications
- Recordkeeping cases resulted in more than $600 million in penalties involving over 70 Firms.
- Since 2021, more than 100 firms have been charged $2 billion in penalties.
- Marketing Rule
- Over a dozen Advisers were charged for:
- Improper use of hypothetical performance in marketing materials.
- Using untrue or unsubstantiated statements of fact.
- Testimonials without the required disclosure.
- Misleading performance statements that were not fair and balanced.
- Over a dozen Advisers were charged for:
- Disclosures of Holdings and Transactions by Insiders
- Over two dozen Firms and individuals received charges for:
- Failing to timely report information about holdings and transactions in public stock.
- Contributing to filing failures by Firm Officers and Directors.
- 11 Institutional Investment Managers were charged more than $3.4 million for failing to disclose securities holdings in reports required for those with discretion over $100 million in certain securities.
- Over two dozen Firms and individuals received charges for:
- Individual Accountability
- A CEO of a formerly Registered Investment Adviser (“RIA”) paid $250,000 and was suspended for 12 months for false and misleading statements.
- A manager of an Audit Firm was permanently suspended as an accountant before the commission, and had to pay a $2 million civil penalty, due to alleged fraud that affected hundreds of SEC filings.
- Market Abuse and of Material Nonpublic Information (MNPI)
- Using advanced data analytics, the SEC was able to address violations including:
- The disclosure of confidential information relating to block trades, as mentioned above.
- The failure to establish, maintain, or enforce policies and procedures that would prevent misuse of MNPI.
- Multi-year cherry-picking schemes defrauding clients out of millions of dollars
- A free-riding scheme worth $2 million dollars over multiple years.
- Insider Trading against an officer at a Publicly Traded Company.
- Using advanced data analytics, the SEC was able to address violations including:
Vigilant’s Conclusion
There were other important topics mentioned in the release, including fraud, that highlight the importance of having a proactive compliance program that encompasses the plethora of compliance risks that Firms can face.
With the announced resignation of Gary Gensler, and a new administration in the White House, there is still much to be discovered about what compliance topics will be most important for 2025. Regardless of any changes to the regulatory climate that may occur, it is vital that Firms do not relax their efforts to avoid costly charges from noncompliance as seen above.
If you have any compliance concerns heading into the new year, need a revamp of your Compliance Program, or need a more direct and tailored hands-on approach to support your Compliance Program, contact Vigilant to learn more about our key differentiators and how we can help.