Stephen Choi, professor at the NYU School of Law and director of the Pollack Center for Law & Business.

The U.S. Securities and Exchange Commission filed 95 new enforcement actions against public companies in fiscal year 2019—the most actions filed in the past 10 years of tracking the numbers.

The filings were a 30% increase over last year and were part of several significant trends reported Wednesday by the New York University Pollack Center for Law & Business and Cornerstone Research.

The report, "SEC Enforcement Activity: Public Companies and Subsidiaries—Fiscal Year 2019 Update," was co-authored by Sara Gilley, Cornerstone Research vice president. Gilley said in a statement, "Issuer reporting and disclosure actions against public companies helped to drive the record number of actions … similar to the high number of actions in [fiscal] 2016."

She was referring to allegations related to fraud and misconduct involving issuers and financial institutions. The commission brought 28 such actions, compared with an average of 20 per year from 2010 through 2018.

The overall increase in enforcement actions was also heavily driven by self-reporting under the commission's share class selection disclosure initiative. The initiative lets investment advisers avoid civil penalties by self-reporting any failure to make required conflict of interest disclosures when they receive fees for recommending certain mutual funds.

New York University law professor Stephen Choi, co-director of the Pollack Center and co-author of the report, told Corporate Counsel, "When you strip away the focus on the share initiative, the number is still high but not out of line with prior years."

Choi said the "big message" that general counsel can take from the report is that the dip in enforcement actions that occurred when the Trump administration took over in 2017 has ended and the numbers have returned to normal. "The SEC has since come back," he said, "and is enforcing vigorously."

Choi said one of the interesting trends to watch in the data was the record high percentage of cooperating defendants.

The report said the SEC noted cooperation by 76% of defendants this year, while the average from 2010 through 2018 was only 51%. "It confirms that the SEC is now focusing more on cooperation," he said.

Other trends to watch, he said, are the use of administrative law proceedings and the imposition of disgorgement. Both are being challenged in court.

The report showed in the first half of 2019 the commission brought 100% of its 52 enforcement actions as administrative proceedings, but in the second half the number dropped to 84%.

On disgorgement, Choi said historically the commission has ordered companies to cough up profits in roughly 50% of its monetary sanctions, and this year continued that trend. But if the U.S. Supreme Court rules in a pending case to limit the commission's power to impose disgorgement, Choi said, "it will affect how the SEC imposes monetary penalties going forward."

More trends noted in the report include:

• The largest settlement imposed in 2019 was $147 million—the lowest amount for the top settlement in the history of the database. The average settlement was $16 million. Settlements totaled $1.5 billion, consistent with the 2010 through 2018 average.
• This is the second consecutive year in which all 15 actions alleging violations of the Foreign Corrupt Practices Act were brought as administrative proceedings. In comparison, only 51% of actions alleging FCPA violations were brought as administrative proceedings prior to fiscal year 2018.
• As usual, the finance, insurance and real estate industry received the most enforcement actions, accounting for 58% of them. The average over the prior nine fiscal years was 48% for the industry. A distant second was manufacturing, at 15%.

Correction: A previous version incorrectly said Gilley was referring to the self-reporting under the commission's Share Class Selection Disclosure Initiative. She was referring to allegations related to fraud and misconduct involving issuers and financial institutions.