On November 9, 2011, the SEC issued a press release announcing that the SEC filed a total of 735 enforcement actions in its fiscal year ending September 30, the most ever in a single year in SEC history. More than $2.8 billion in penalties and disgorgement were ordered as result of the enforcement actions. The SEC views the increase in the overall number of enforcement actions as evidence that it is fulfilling its mission of protecting investors and maintaining market efficiency, and credits the increase to the recent reorganization of the Division of Enforcement, the most significant since its establishment in the 1970s. In addition to the increase in the total number of enforcement actions, the number of enforcement actions related to investment advisers and broker-dealers also increased substantially. A single-year record of 146 enforcement actions pertaining to investment advisers and investment companies were filed, up 30% from 2010. The 112 enforcement actions against broker-dealers amounts to a 60% increase from the previous year.

This trend seems likely to continue. Not only has the SEC expressed its intention to focus on bringing more enforcement actions, the Dodd-Frank Act has provided regulators more sources of support for enforcement efforts.  For example, the new whistleblower program enables the SEC to potentially pay whistleblowers who provide the SEC with credible information about securities law violations that lead to successful enforcement actions.  The elimination of the private adviser exemption also will provide the SEC with new direct regulatory oversight of advisers to private funds.  Consequently, it is more critical than ever for firms to establish and maintain effective compliance programs and set a “tone at the top” to encourage a strong compliance culture throughout the firm.

For additional information about the implications of the SEC’s increased enforcement efforts and how firms should respond, please contact Zac Rosenberg, Compliance Consultant by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or by phone at (619) 278-0020.