As part of its “Fiscal Year 2013 Agency Financial Report” released by the Securities and Exchange Commission (“SEC”) on December 17, 2013, the SEC discussed how the agency’s new and “more aggressive enforcement actions” fared in 2013. According to the report, the SEC ended the fiscal year of 2013 with 686 enforcement actions, including 402 in the last six months of the year. Furthermore, the SEC stated the resulting disgorgement and monetary penalties arising from these enforcement actions totaled $3.4 billion. This number represents a ten percent (10%) increase from 2012, when monetary penalties from SEC sanctions totaled $3.1billion, and a twenty-two percent (22%) increase from what was seen in 2011. The SEC cited several reasons for this increase, including a more effective examination program, strengthening market structure, and the information obtained by those those in the industry in the form of “whistleblowing” tips. According to the SEC, it received an estimated 3,238 tips during the fiscal year and paid out more than $14 million to whistleblowers for tips received which led to enforcement actions. For more information on whistleblowers, go here.
The SEC plans to increase its presence in the industry, and will look further its aggressive enforcement actions with the use of following initiatives for the upcoming year of 2014:
- New Task Forces – Such as the Financial Reporting and Audit (FRAud) Task Force and the Microcap Task Force.
- Consolidated Short Selling Charges – The SEC plans to conduct more streamlined investigations focusing on firm’s violating Rule 105 of Regulation M.
- A Strong Pipeline – The SEC heads into the new fiscal year strong having opened 908 investigations last year (up 13%) and obtaining 573 form orders of investigation (up 20%).
- Technology Improvements – The SEC has worked to improve their technical and analytical capabilities in order to more quickly and efficiently analyze large volumes of electronic data.
These findings presented by the SEC show the importance of understanding and adhering to those rules and regulations that apply to your RIA firm. Failure to do so may result in deficiency actions, penalties, fees and even criminal enforcement actions.
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