A significant way that the Securities and Exchange Commission enforces federal securities laws is through levying fines on wrongdoers in the financial services industry. Within the past few years, the SEC has issued billions of dollars in civil penalties and disgorgements in civil enforcement proceedings against defendants. The SEC allocates received fines, amongst other things, to compensate victims of securities violations. The unfortunate reality, however, is that the SEC only collects a little over half of the fines imposed through settlements and judgments according to agency statistics reported by Wall Street Journal.
In a five-year fiscal period ending in September 2018, the SEC reportedly collected 55% of the 20 billion dollars in fines imposed upon wrongdoers in the industry. Between 2009 and 2013, the SEC issued $14.6 billion in fines but collected 60% from the defendants. In the fiscal year 2018 alone, the SEC only received about 28% of their 4 billion dollars in fines levied through 821 enforcement actions. Out of the total owed fines, $1.7 billion comes from a settlement with an international oil company, Petrobras and the SEC is permitting this owed money to go to Brazilian authorities instead. Therefore, it is not unlikely that the SEC will never collect this significant fine that could have gone to funds meant for harmed investors.
The SEC has struggled with collecting civil penalties and disgorgement ordered in enforcement proceedings for quite some time. Based on the kinds of people and entities fined, the SEC often holds a low chance of actually getting the money. Fined defendants often do not have the money to pay, on top of dealing with the other consequences of their actions such as serving prison time and owing civil suits. After all, several fraud perpetrators, such as Ponzi Schemers get charged for their actions only after losing money needed to maintain their scheme. Even if the defendants can afford to pay the fine, the SEC does not have the right to force payment by seizing a debtor’s property or assets. Instead, the SEC must go through the long, tedious process of collecting money through liens and other court remedies to collect on the judgments.
SEC officials suggest that the agency’s enforcement is still adequate despite the drop in enforcement actions and fines. While the numbers may not provide a complete picture of the SEC’s enforcement strength, the stats certainly offer some perspective. The agency’s weaknesses with collecting fines are certainly not beneficial for their efforts to remedy investors and deter bad conduct. For one, the SEC loses out on money that could go towards harmed investors. Additionally, bad actors in the industry could perceive SEC’s shortcomings with forcing defendants to pay money as an opportunity.
Nonetheless, investors do not have to solely rely on the SEC and other government enforcement actions to recover their losses. Anyone who unjustly lost money from an account serviced by a FINRA-registered brokerage firm should retain a securities fraud attorney. An experienced investment fraud attorney can help you file a legal action against the brokerage firm and brokers responsible for your losses. Call our securities law firm for a free consultation to explore your rights.