The Securities and Exchange Commission’s Division of Enforcement has seen tips, complaints and referrals on potential fraud skyrocket since the beginning of the COVID-19 pandemic, and has taken action to prevent fraud related to the crisis and to stop those who attempted to capitalize on it, according to the division’s annual report.
In March, the SEC formed a Coronavirus Steering Committee to oversee fraud prevention efforts by coordinating investigations relating to potential misconduct in the areas of microcap, insider trading and financial fraud and issuer disclosure. From mid-March through the end of the fiscal year, the division’s Office of Market Intelligence triaged approximately 16,000 tips, complaints and referrals, a roughly 71 percent increase over the same time period last year, and the division opened more than 150 COVID-related inquiries and investigations and recommended several COVID-related fraud actions to the commission.
The division also had to adjust how it conducted investigations in the lockdown, figuring out how to take testimony and depositions remotely, among other process changes.
In addition to the division’s coronavirus response, the report, which was released Monday, also highlights non-COVID-related issues that arose and strategic changes to the division’s operations. These include adding efficiencies to the whistleblower program and increasing the pace of investigations.
In fiscal year 2020, the SEC brought 715 enforcement actions, including 405 standalone actions, addressing a range of issues including issuer disclosure and accounting violations, foreign bribery, investment advisory issues, securities offerings, market manipulation, insider trading and broker-dealer misconduct. It obtained judgments and orders totaling a record $4.68 billion in disgorgement and penalties and returned more than $600 million to harmed investors. The SEC also achieved a record in the division’s whistleblower program, awarding $175 million to 39 whistleblowers, the highest dollar amount and number of individuals in a fiscal year.
"This year's report highlights Enforcement's extraordinary efforts across the country to identify wrongdoing and take meaningful action to protect American investors from misconduct, including in the face of the many challenges imposed by COVID-19," said SEC Chairman Jay Clayton in a statement. "In addition to discussing the core types of cases brought by the commission, the report shows how Enforcement took action at the onset of the global pandemic against wrongdoers who sought to take advantage of the uncertainty and volatility in the markets.”
"Fiscal year 2020 was a year filled with extraordinary challenges that impacted us all in countless ways. I am incredibly proud of the exceptional work of my colleagues in the face of these challenges and I am pleased to share the results of that work in our annual report," said Stephanie Avakian, director of the SEC's Division of Enforcement, in a statement.
