2016: A Record Year for SEC Enforcement

There’s been an uptick in SEC scrutiny of RIAs.  For fiscal year ended September 2016, the SEC said it brought 160 cases against investment advisors or investment companies, a record, and the highest number of independent or standalone cases involving these groups, at 98. 

Overall, the Commission filed 868 enforcement actions during the year, up from 807 in fiscal year 2015 and 755 in fiscal year 2014.  But the SEC didn’t order as much in penalties, with disgorgement and penalties totaling over $4 billion, compared to $4.19 billion last year and $4.16 billion the year prior to that.

The SEC oversees over 12,000 investment advisors and exams, but only are able to audit about 10% to 12% each year. Earlier this year, the agency added 100 new examiners to its investment advisor exam staff by shifting examiners from its broker-dealer unit, bringing the total to 630.

Among the SEC’s most significant enforcement actions in FY2016:

• Insider trading charges against Leon Cooperman and Omega Advisors.
•  Insider trading charges against William 'Billy' Walters and tipper Thomas Davis, an ex-Dean Foods board member.
•  $415Mn enforcement action against Merrill Lynch for violating customer protection rules.
• $267Mn enforcement action against JPMorgan wealth mgmt subs, for failing to disclose conflicts of interest to clients. 
• FCPA cases against Och-Ziff hedge fund and its CEO and CFO.