Leaders of the Securities & Exchange Commission devoted much of 2009 to reorganizing and bolstering how the agency detects and prosecutes wrongdoing in the financial marketplace. According to an analysis released today by Gibson, Dunn & Crutcher, the effort seems to be yielding results.
The SEC in calendar year 2009 filed 320 injunctive actions in federal court against 981 defendants, Gibson Dunn determined in its annual review of SEC enforcement. In 2008, the agency brought 232 cases against 620 defendants. It’s a 58% increase in the number of defendants charged, and a 38% jump in new actions filed.
Further, while 35% of cases settled at the time of filing in 2008, only 24% settled in 2009. This shows a willingness by the agency to litigate cases to final judgment, said Gibson Dunn securities practice co-chair Mark Schonfeld.
“It means they’ll have more litigation to carry into this year,” he said. “There’s no question it significantly increases the litigation burden on the agency.” He added, “The real thing to watch will be how the commission does in these cases.”
The firm, which has issued a series of reports focusing on different agencies, also found the SEC brought more criminal charges in FY 2009 – 154 cases, compared to 108 in FY 108.
Monetary penalties were way up as well. Disgorgement ordered in FY 2009 totaled $2.09 billion, versus $774 million in FY 2008, a 170% increase. Other penalties went from $256 million to $345 million, and asset freezes were sought in 82 cases in 2009 compared to 46 in 2008.
Although the number of investigations increased in 2009, the number that were closed decreased. In FY 2008, the SEC opened 890 investigations and closed 1,355. In FY 2009, by contrast, 944 were opened but just 716 were closed.
“In the current enforcement environment, the staff may not be focusing as much on closing cases,” the report says. “This is a cause for concern because it means that once an investigation is opened, it is less likely to be closed, even though it may not result in an enforcement action, causing the subjects of investigations to live with the overhang of an open but inactive investigation for years.”