SEC finds little to celebrate in record $18B penalty haul

Rocketed by a flurry of enforcement actions at the tail end of the Biden Administration, SEC penalties more than doubled to an all-time high in the watchdog agency’s latest completed fiscal year.

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The Securities and Exchange Commission reported Tuesday that it obtained orders for $17.9 billion in monetary penalties in its fiscal 2025, which ended on Sept. 30. That was more than twice the $8.2 billion the industry regulator obtained in its previous fiscal year, which itself had set a record.

The SEC was quick Tuesday to characterize the fiscal 2025 results as an anomaly running contrary to its current push to devote itself to cases involving direct investor harm. In a swipe at the regulatory regime under the Biden Administration, the SEC’s report complained of enforcement actions taken merely to “pursue media headlines and run up numbers” in the months before President Donald Trump was sworn into office.

“FY 2025 was a unique period of transition for the enforcement division never experienced before in modern SEC history,” according to the SEC’s release. “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.”

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Under its current chairman, the Trump-appointed Paul Atkins, the SEC has deliberately set out to avoid what he and others deem “regulation by enforcement.” Critics of previous SEC administrations have complained that the agency has too often used regulatory actions to exceed the authority specifically granted it under the law.

In a statement Tuesday, Atkins said the SEC had ended 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,” Atkins said.

A particular sore spot for critics of the SEC has been the more-than $2 billion in penalties the agency has handed down against firms accused of violating bans on so-called “off channel” communications. Virtually every big name in wealth management, including JPMorgan, Morgan Stanley, LPL Financial, Ameriprise and Raymond James, has been hit with hefty fines for not preventing employees from using WhatsApp and similar encrypted messaging services to discuss business matters with colleagues and clients.

Regulators argue such off-channel communications are often impossible to recover and can impede investigations into alleged wrongdoing. Critics contend that firms have been forced to pay out tens or hundreds of millions of dollars in cases that do not allege direct harm to investors.

The SEC on Tuesday lumped those off-channel cases in with previous enforcement actions brought against cryptocurrency firms and securities dealers for failing to have themselves properly registered. 

All of these cases, according to the SEC, “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.”

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The SEC typically publishes its annual tally of enforcement penalties much earlier. Its report for its fiscal 2024, for instance, came out in November 2024.

This year’s release was likely delayed by a variety of factors, including a wide-ranging partial government shutdown last fall. The agency has also been working with fewer employees; its staff headcount has fallen by 18% since 2024 to roughly 4,000. The SEC did not respond to a request for comment.

Even before the agency’s release Tuesday of its fiscal 2025 enforcement findings, signs were rampant that its regulatory priorities had shifted. In November, Cornerstone Research and New York University’s Pollack Center for Law & Business noted a steep drop in enforcement actions and fines in SEC cases brought against public companies and their subsidiaries. The report — which excluded judgements against private firms and business owners — found that the SEC collected only $800 million from public companies in fiscal 2025. That was the lowest amount in any year going back at least to 2017.

The SEC has meanwhile dropped more than a dozen crypto-related cases and bowed out of various long-running lawsuits. Last month, its head of enforcement, Margaret Ryan, resigned after being in the position for less than a year. On Wednesday, the SEC announced she’ll be succeeded by David Woodcock, the chair of the securities enforcement practice group at the law firm Gibson, Dunn & Crutcher and a former director of the SEC’s regional office in Fort Worth, Texas.

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Enforcement actions, restitution to investors down, tips and complaints up

Despite its record for penalty orders, the SEC brought fewer enforcement actions last year. The total number of actions the regulator filed in fiscal 2025 was down nearly 22% to 456.

Again, the SEC emphasized that it was concentrating on cases that involved likely investor harm. “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,” according to the agency’s release.

Of the $17.9 billion in penalties the SEC obtained orders for, $10.8 billion was in the form of disgorgement of ill-gotten gains and prejudgment interest and $7.2 billion in the form of civil penalties. The SEC said the fines it’s seeking in many of its cases have effectively been paid already in response to court orders handed down in separate but related actions. 

It also noted a large share of the penalties in its 2025 total come from a more than $6 billion judgment won in litigation over a massive Ponzi scheme run by Robert Allen Stanford and his colleagues at the now-defunct Stanford Financial Group. With those amounts excluded, the SEC obtained orders only for a total of $1.4 billion in disgorgement and prejudgment interest and $1.3 billion in civil penalties in its fiscal 2025.

Of the SEC’s 456 enforcement actions in its latest fiscal year, 303 were “standalone” actions, meaning they didn’t come in response to previous judgments or convictions. Sixty-nine, meanwhile, were “follow-on” proceedings seeking to bar someone from the securities markets as a result of criminal convictions, civil injunctions or other orders.

Money returned to harmed investors fell by 24% year over year to $262 million in the SEC’s fiscal 2025. The agency meanwhile awarded $60 million to 48 whistleblowers in its latest fiscal year. The number of tips, complaints and referrals was up nearly 19% year over year to 53,753.