Document Type

Article

Publication Title

Yale Journal on Regulation

Abstract

Congress has repeatedly expanded the authority of the SEC to pursue violations of securities laws in proceedings adjudicated by the SEC's own administrative law judges, most recently through the Dodd-Frank Act. We report the results from an empirical study of SEC enforcement actions against non-financial public companies to assess the impact of the Dodd-Frank Act on the balance between civil court and administrative enforcement actions. We show a general decline in the number of court actions and an increase in the number of administrative proceedings post-Dodd-Frank. At the same time, we show an increase in average civil penalties post-Dodd-Frank for both court actions and administrative proceedings involving non-financial public companies. Companies were also more willing to cooperate with the SEC, consistent with an increase in the SEC's leverage in administrative proceedings. We also provide evidence that the mix of cases the SEC brings in administrative proceedings has changed post-Dodd-Frank. We show an increase in the disgorgement amount and the number of years during which the violation allegedly took place, which are two proxies for the complexity and cost of prosecution of the alleged underlying securities law violation. At the same time, administrative proceedings following Dodd-Frank tended to be weaker (i.e., less likely to prevail) and less salient (i.e., less likely to garner media attention). These findings are consistent with the SEC attempting to maximize the monetary penalties it imposes as well as positive media attention from its enforcement actions, while allocating its limited resources between administrative proceedings and civil court actions in a cost-effective way. Although we cannot measure the deterrent impact of the additional cases that the shift to administrative proceedings has allowed the SEC to bring, it does appear that the SEC is using administrative proceedings to expand its enforcement efforts against public companies.

First Page

1

Volume

34

Publication Date

2017

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