FINRA Lawyer Blog
Much has been said about the Trump’s administration effect on the SEC’s regulatory activities. Now, hard data confirms what we all suspected: under Trump, the Securities Exchange Commission has brought fewer enforcement actions and reduced its financial sanctions.
A new study by a Georgetown University professor, covering fiscal year 2017, revealed that the SEC brought 612 cases and follow-on actions in 2017, which represents a substantial drop from 743 enforcement actions brought during fiscal year 2016.
In 2016, financial sanctions amounted to $4.08 billion, while in 2017 they reached $3.45 billion.
Some sectors have particularly benefited from the SEC’s laxer approach to rule enforcement according to a study led by New York University and Cornerstone Research scholars. Public companies faced 62 SEC enforcement actions in 2017, a significant drop from the 92 actions they endured during fiscal year 2016.
For Stephen Choi, one of the NYU study’s authors, “It’s a pretty dramatic drop, especially when you look at the first half of 2017 and the second half of 2017. It’s sort of falling off a cliff, which to me indicates that something changed.”
“The timing is too coincidental with the change in the administration and the change in leadership in the SEC,” Choi has commented.
One possible interpretation is that the SEC of the first half of 2017 was still, in a way, Obama’s SEC. Once the Trump administration was in full fling, the number of enforcement actions targeting public companies fell dramatically. During the first half of the fiscal year, financial settlements in connection with this type of actions amounted to $1 billion.
For the remainder of the year, they dropped to a mere $196 million.
The question is: Is the observed shift simply a result of Trump easing up on corporate America? As the SEC announces that it will focus on protecting retail investors, it is natural to wonder whether this does not mean that they will stop targeting large-scale fraud by public companies.
For the SEC Enforcement Division’s Stephanie Avakian, “The premise that there is trade-off between Wall Street and Main Street enforcement is a false one.”
Nevertheless, the data is there, and things have evidently changed at the SEC. For some analysts, however, we should be focusing on whether the agency has sufficient funding to police markets, rather than on the size of fines and the number of enforcement actions it brings.
The SEC’s current strategies appear to embody Trump’s vision, which he expressed at the time of nominating Jay Clayton to run the agency: “We need to undo many regulations which have stifled investment in American businesses, and restore oversight of the financial industry in a way that does not harm American workers.”
The effects of the President’s policies on both the financial industry and the economy remain to be seen.