On October 22, 2015, the SEC released its enforcement results for fiscal year 2015, which ended September 30, 2015. In FY 2015, the SEC filed a record 807 enforcement actions, a nearly 7% increase from FY 2014. It was the second straight year that the number of enforcement actions filed by the SEC increased from the prior year. The SEC also obtained approximately $4.19 billion in disgorgement and penalties, which is up from fiscal years 2014 and 2013. The SEC also used the opportunity to trumpet its success in “first-of-their-kind” cases, which included actions against a private equity advisory for misallocating “broken deal” expenses, against an underwriter for pricing-related fraud in the primary market for municipal securities, and against a financial institution for FCPA violations.
In the release, the SEC noted that it “[w]on all six U.S. District Court jury or bench trials in fiscal year 2015 and enjoyed strong success in administrative proceedings,” but this fact is unlikely to cool the continued debate about the SEC’s growing use of its administrative proceedings in place of civil actions in federal court. On the same day the SEC released its enforcement results, Representative Scott Garrett of New Jersey, chairman of the House’s Financial Services Subcommittee on Capital Markets, introduced H.R. 3798, the Due Process Restoration Act. Representative Garrett explained that the proposed bill would “rein-in the [SEC’s] controversial overuse of in-house administrative law judges” by giving defendants a mandatory right to opt out of the SEC’s in-house administrative proceedings by removing the case to federal court. For cases that proceed as an administrative proceeding, the proposed bill would raise the burden of proof to clear and convincing evidence.
Less than a month ago, the SEC introduced its own proposed amendments to its Rules of Practice governing its administrative proceedings, perhaps as a way to address many of the public concerns surrounding its administrative proceedings. The SEC’s proposed rules would allow the parties to take a limited number of witness depositions, even if the deponent could testify at trial; would extend the time before a hearing in certain cases; and would include a handful of other proposed changes relating to appeals and electronic filing. The public comment period on the SEC’s proposed rules ends December 4, 2015, although it appears that the debate on the issue is far from over.
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