New data reveals scale of enforcement action taken by the Securities and Exchange Commission
Apr 12, 23
Over $16 bn of penalties have been paid as a result of Securities and Exchange Commission (SEC) enforcement actions since 1999 according to the latest data from Ideagen Audit Analytics.
Their latest database, Accounting and Auditing Enforcement Releases (AAER) which launches today, provides detailed information on SEC enforcement actions taken against public and private companies, auditors, law firms, and individuals since October 18, 1999.
The top five reasons for the orders are issues with:
- Financial or accounting records
- False or misleading statements
- Problems with internal controls
- Securities fraud
- Improper professional conduct
The biggest financial penalty was $2.25bn in 2003 issued to WorldCom Inc for a number of issues surrounding accounting fraud and the biggest total number of financial penalties were issued in 2005 (122 in total).
The start of the new millennium saw the peak of enforcement activity. The Ideagen Audit Analytics’ AAER database identifies 18 issue categories cited by the SEC and half of these categories peaked in 2002. There are 74 recordings of violations like 'false and misleading statements' and 'securities fraud' in 2002 compared to 20 and 23 respectively in 2022.
That coincides with the Sarbanes-Oxley Act, brought in as a result of the Enron collapse, which put greater scrutiny on auditing and accounting.
Nicolle Hallas, Ideagen Audit Analytics Research Manager, said: “We know there’s interest in this kind of data, particularly among auditors, law firms and academia, as we have been approached to provide insight on enforcement trends in the past.
“We’ve therefore created this database to provide detailed, searchable and filterable information on SEC enforcement actions against public and private companies, auditors, law firms and individuals.”
Financial penalties aren’t the only actions available to the SEC. In fact, the most common action taken was ‘cease and desist’ which was issued over 1000 times and means entities are alleged to be in violation of federal securities laws and regulations. This was followed by ‘financial penalty’, ‘bar prohibition and suspension,’ and what is described as ‘remedial measures’. It’s possible for more than one action to be taken against the same company for the same incident so a cease and desist could also be accompanied with a financial penalty.
Ideagen Audit Analytics’ Accounting and Auditing Enforcement Releases database also contains data on company, auditor, auditor affiliate, and law firm profiles. The AAERs are all publicly available on the SEC's website. But in order to aggregate that information, each AAER would need to be reviewed. The Ideagen Audit Analytics database takes all that information, normalises it, and adds taxonomies that allow the data to be filtered in any number of ways.
More information about the database and product demos can be found on the Ideagen Audit Analytics website.