Traditionally, the SEC Enforcement Division releases its fiscal year (ends on September 30th) enforcement report in the Fall.
Yesterday, the SEC released its enforcement report for FY 2025 and it contains some zingers.
The SEC’s release begins: “Central to an effective enforcement program is determining which cases to bring and responsibly stewarding Commission resources. Regrettably, such resources have been misapplied in prior years to pursue media headlines and run up numbers, and in turn, led to misguided expectations on what constitutes effective enforcement.”
The release continues:
“FY 2025 was a unique period of transition for the enforcement division never experienced before in modern SEC history. It was characterized by an unprecedented rush to bring a significant number of cases in advance of the presidential inauguration and the aggressive pursuit of novel legal theories under the prior Commission.
This period brought about the current Commission’s resolution of prior cases that were not sufficiently grounded in the federal securities laws. The current Commission deliberately refocused the enforcement program on matters of fraud—cases that inherently require more time and resources to develop and bring, often requiring up to two or more years to manifest results.
Since fiscal year 2022, the prior Commission brought 95 actions and $2.3 billion in penalties against firms for book-and-record violations, specifically failing to maintain and preserve off-channel communications. Together with seven crypto firm registration-related and six ‘definition of a dealer’ cases, these cases identified no direct investor harm from those violations, produced no investor benefit or protection, and demonstrate what the current Commission views as a misinterpretation of the federal securities laws, a misallocation of Commission resources, and a bias for volume of cases brought versus matters of investor protection. This year’s enforcement results clarify the flaws of these actions and their respective penalties and re-establish the definition and measure of enforcement effectiveness, grounded in Congress’s original intent and focused on bringing actions that actually prevent investor harm instead of headlines and inflated numbers.
Going forward, enforcement priorities and results will be linked to the Commission’s and the Division’s core mandate, and will thus contemplate the following elements to fulfill its mission: Standing up to fraud in its many forms and those market participants engaged in such misconduct; addressing the fraudulent and manipulative conduct of the parties in question through appropriate remediation; and repaying investors’ losses when harmed.”
In the release, SEC Chairman Paul Atkins stated:
“Over the past year, the Commission has put a stop to regulation by enforcement and recentered its enforcement program on the Commission’s core mission by prioritizing cases that provide meaningful investor protection and strengthen market integrity. We have redirected resources toward the types of misconduct that inflict the greatest harm—particularly fraud, market manipulation, and abuses of trust—and away from approaches that prioritized volume and record-setting penalties over true investor protection. A key part of this course correction is a renewed emphasis on holding individual wrongdoers accountable, which promotes stronger deterrence and better safeguards investors. I am proud of the staff’s work in advancing an enforcement program grounded in sound judgment, clear legal authority, and the real-world needs of the investing public.”
SEC Commissioner Mark Uyeda stated:
“I fully support the move away from using enforcement as a tool for policymaking, and the return to the Commission’s historical norms. We will remain focused on coherent and transparent policymaking, as well as meaningful engagement with market participants to promote compliance, and wield the authority of enforcement in a more appropriate manner, guided by investor protection above all.”
