SEC Filed 147 Actions Against Advisers

The Securities and Exchange Commission filed 147 enforcement actions against investment advisers and investment companies, one more than the previous year’s record number.

The SEC’s near-record total 734 actions in 2012 included more cases involving highly complex products, transactions, and practices, including those related to the financial crisis, trading platforms and market structure, and insider trading by market professionals.

The SEC also announced that it obtained orders in fiscal year 2012 requiring the payment of more than $3 billion in penalties and disgorgement for the benefit of harmed investors. It represents an 11% increase over the amount ordered last year. In the past two years, the SEC has obtained orders for $5.9 billion in penalties and disgorgement.

The SEC filed numerous actions against advisers as a result of proactive measures that identify threats early on so that action can be taken to halt the misconduct and minimize harm to investors. In 2012, several actions were the result of the division’s investment adviser compliance initiative, which looks for registered investment advisers who lack effective compliance programs designed to prevent securities laws violations.

The SEC also filed actions charging three advisory firms and six individuals as part of the Aberrational Performance Inquiry into abnormal performance returns by hedge funds. Other actions against investment advisers included cases against UBS Financial Services of Puerto Rico and two executives for misleading disclosures relating to certain proprietary closed-end mutual funds, Morgan Stanley Investment Management for an improper fee arrangement, and OppenheimerFunds for misleading investors in two funds suffering significant losses during the financial crisis. UBS paid more than $26 million to settle the SEC’s charges, while OppenheimerFunds paid more than $35 million for its violations.


The agency filed 134 enforcement actions related to broker/dealers, a 19% increase over the previous year. Broker/dealer actions included charges against the New York brokerage firm Hold Brothers On-Line Investment Services and three of its executives for their roles in allowing overseas traders to access the markets and conduct manipulative trading through accounts the firm controlled. The defendants in the Hold Brothers action paid a total of $4 million to settle the SEC’s charges.

A Latvian trader and electronic trading firms were also charged for their roles in an online account intrusion scheme that manipulated the prices of more than 100 NYSE and Nasdaq securities.

“The record of performance is a testament to the professionalism and perseverance of the staff and the innovative reforms put in place over the past few years,” said Mary L. Schapiro, chairman of the SEC. “We’ve now brought more enforcement actions in each of the last two years than ever before including some of the most complex cases we’ve ever seen.”

According to Robert Khuzami, director of the SEC’s division of enforcement, it’s not a matter of simple numbers, but the increasing complexity and diversity of the cases filed that show how successful the division has been. “The intelligence, dedication and deep experience of our enforcement staff are, more than any other factors, responsible for the division’s success,” Khuzami said.

The sustained high-level performance comes two years after the division underwent a significant reorganization. The results in 2012 were aided by many of the reforms and innovations put in place in the past two years, such as increased expertise in complex and emerging financial markets, products and transactions, through enhanced training, the hiring of industry experts and the creation of specialized enforcement units focused on high-priority misconduct; a flatter management structure; streamlined and centralized processes and the improved use of information technology; and a vastly enhanced ability to collect, process and analyze tips and complaints.