On November 18, 2021, the SEC’s Division of Enforcement announced its Enforcement Results for Fiscal Year 2021, and there are a few key takeaways for fund managers.

  • In spite of the continued headwinds posed by the global COVID-19 pandemic, the Commission brought 697 enforcement actions in FY 2021. The Commission also filed 434 new enforcement actions, representing a seven percent increase over the prior year. Seventy percent of these new or “standalone” actions involved at least one individual defendant or respondent.
  • Investment advisor and investment company cases accounted for 120 standalone actions in the past year (28% of total new cases, up from 21% in FY 2020).
  • Insider trading cases accounted for 28 standalone, two fewer than FY 2020.
  • The SEC also obtained judgments and orders for nearly $2.4 billion in disgorgement and more than $1.4 billion in penalties, which represented a respective 33 percent decrease and 33 percent increase over amounts ordered during the prior fiscal year in these categories.
  • The Commission awarded a record amount of whistleblower awards in FY 2021, awarding a total of $564 million to 108 whistleblowers. The whistleblower program also surpassed $1 billion in awards over the life of the program.

The Commission also highlighted its actions against individuals and gatekeepers and cases involving crypto, financial fraud and issuer disclosures, investment professionals, market integrity, insider trading and market manipulation, FCPA matters, public finance abuse, and securities offerings.

Enforcement Actions Filed in Fiscal Years 2016 to 2021

  FY 2021 FY 2020 FY 2019 FY 2018 FY 2017 FY 2016
Standalone Enforcement Actions (Civil and Admin. Proceedings) 434 405 526 490 446 548
Follow-On Admin. Proceedings 143 180 210 210 196 195
Delinquent Filings 120 130 126 121 112 125
Total Actions 697 715 862 821 754 868
Disgorgement and Penalties Ordered (in billions) $3.80 $4.68 $4.35 $3.95 $3.79 $4.08

Under former Chairman Clayton, private fund advisers benefited indirectly from the SEC’s focus on “Main Street” investors.  More of the SEC’s limited resources were devoted to addressing retail fraud, leaving fewer resources available to focus on private funds.  As former Enforcement Director Stephanie Avakian explained recently, the SEC relied more heavily on exams by OCIE (now the “Division of Examinations”) – through deficiency notices and remediation, rather than enforcement actions – to address perceived private fund compliance violations.

For much of 2021, the SEC has been in transition as new staff was appointed.  Over the coming year, we expect that Chairman Gensler and Enforcement Director Grewal will place a far greater emphasis on policing “Wall Street,” which today has grown to encompass private funds.  Now that the pieces are in place, we expect to see an increase in enforcement involving private fund managers.

Photo of Joshua M. Newville Joshua M. Newville

Joshua M. Newville is a partner in the Litigation Department in New York and a member of Proskauer’s White Collar Defense & Investigations Group and the Asset Management Litigation team.

Josh handles securities litigation, enforcement and regulatory matters, representing corporations and senior executives…

Joshua M. Newville is a partner in the Litigation Department in New York and a member of Proskauer’s White Collar Defense & Investigations Group and the Asset Management Litigation team.

Josh handles securities litigation, enforcement and regulatory matters, representing corporations and senior executives in civil and criminal investigations. In addition, Josh advises registered investment advisers and private fund managers on regulatory compliance, SEC exams and related risks.

Photo of Samuel J. Waldon Samuel J. Waldon

Sam Waldon is a partner in the Litigation Department and a member of the Asset Management Litigation, Securities Litigation, and White Collar Defense & Investigations Groups.

Sam’s practice focuses on advising private fund managers on securities litigation, enforcement and regulatory matters. He also…

Sam Waldon is a partner in the Litigation Department and a member of the Asset Management Litigation, Securities Litigation, and White Collar Defense & Investigations Groups.

Sam’s practice focuses on advising private fund managers on securities litigation, enforcement and regulatory matters. He also represents corporations and financial institutions, and their officers, directors and employees, in investigations, exams, internal investigations and litigation. Sam has in-depth experience in a broad range of Securities and Exchange Commission (SEC) enforcement matters, including investment adviser, asset management, private equity, insider trading and market abuse, financial disclosure, accounting, broker dealer, FCPA, and cyber-related misconduct.

Before joining Proskauer, Sam served as Assistant Chief Counsel in the SEC’s Division of Enforcement for eight years. In that role, Sam helped develop and implement many of the Division’s policies and procedures, and advised the Division’s senior leadership, investigative staff and trial unit attorneys on a wide range of legal and policy issues. He regularly provided guidance on the terms of negotiated settlements and charging decisions in litigated matters. Sam also worked closely with staff in other Divisions and Offices throughout the SEC on enforcement related issues, including playing a key role in the drafting of the rules establishing the SEC’s whistleblower program.