Securities and Exchange Commission (SEC) enforcement action settlements are forecast to reach a three-year high by year-end 2008, according to a study by NERA Economic Consulting. The SEC is on pace to reach 739 settlements by the end of the year, which would be the second straight year of increased settlement activity. Some 702 settlements were reached in 2007 and 663 were recorded in 2006.
Since Sarbanes-Oxley (SOX) was enacted in 2002, the SEC has imposed "unprecedented" monetary penalties on a range of defendants, NERA research indicates. Before SOX, the largest penalty imposed in an SEC enforcement action against a publicly traded company for financial fraud was $10 million. Since SOX, penalties of $10 million or greater have been imposed against 115 parties. Fourteen were penalized at least $100 million, NERA states.
Other findings from the NERA study, "SEC Settlements: A New Era Post-SOX," show:
- Settlements against individuals are on the rise and are projected to reach 568 by year-end 2008. Company settlements are declining, on the other hand.
- In 2007, the median company settlement was $700,000.
- Insider trading is the most frequent allegation in SEC settlements for individuals.
In producing its report, NERA reviewed SEC litigation release and administrative proceeding documents from July 31, 2002, through Sept. 30, 2008.