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In the fiscal year 2019, the Securities and Exchange Commission broke its own record, levying some $4.3 billion in penalties and disgorgement from companies it oversees, with 191 cases brought against investment advisors and companies – a 77 percent increase from the year before. That record was broken again this year, with $4.68 billion in penalties and disgorgement.
But the Commission, which published this year’s enforcement roundup after Private Funds CFO went to press, pulled back on enforcements against IAs and ICs in FY 2020, as experts speaking with us predicted. This year, the SEC brought 85 standalone cases against them – 21 percent of total standalone enforcement filings.
That said, the subset of private funds does not appear to have benefited from the decline. The SEC doesn’t break out statistics for private funds in its annual enforcement report, but by Private Funds CFO’s count, it brought some 15 enforcement actions against private funds in 2019. That doubled, at least, in the calendar year 2020.
The increase in actions against private funds this year is unlikely to be a fluke. As private markets grow, and as retail investors increase their exposure via defined contribution plans (as we examined in last month’s cover story), the regulator only has more reason to scrutinize the industry. As one lawyer points out in our cover story, the SEC now has staff dedicated to private funds, with resources, expertise and data behind them. And, as you’ll read, the SEC isn’t just going after the most flagrant offenders.
Email prepared by Graham Bippart