SEC more than doubles muni enforcement filings in FY 2024

The Securities and Exchange Commission rocked the boat in fiscal year 2024 by more than doubling their enforcement filings in the municipal market compared to fiscal year 2023. With a whopping 583 total enforcement actions and a record-breaking $8.2 billion in financial remedies ordered, the SEC made quite a splash.

Even though the amount of financial remedies ordered was substantial, there was actually a 26% decrease in total enforcement actions compared to the previous year. Throughout all types of cases, whether they were “stand-alone,” “follow-on,” or against issuers who allegedly failed to make required filings to the SEC, 2024 showed a significant drop in actions compared to the year prior.

SEC Chair Gary Gensler expressed his confidence in the Division of Enforcement, calling them a reliable cop on the beat who follows the facts and the law to hold wrongdoers accountable. This commitment to market integrity benefits both investors and issuers alike.

The Public Finance Abuse Unit, responsible for municipal market cases, brought 14 cases in FY 2024, a sharp increase from six cases in the previous year.

The $8.2 billion in financial remedies ordered by the Commission includes $6.1 billion in disgorgement, a record high, and $2.1 billion in prejudgment interest, the second-highest amount ever recorded. Notably, 56% of all financial remedies ordered can be traced back to Terraform Labs and Do Kwon, who were involved in one of the biggest securities fraud cases in U.S. history. Following a trial, the defendants were ordered to pay over $4.5 billion, the highest remedies ever obtained by the SEC.

The SEC attributes the rise in filings this year to the active participation of market participants. The willingness of public companies, major broker-dealers, and advisory firms to self-report, remediate, and cooperate with investigations showcases a commitment to fostering a culture of compliance, according to Sanjay Wadhwa, Acting Director of the SEC’s Division of Enforcement.

In addition to financial remedies and recordkeeping violations, fiscal year 2024 saw the Commission bring its first cases charging recordkeeping violations against municipal advisors. Firms found in violation were censured, ordered to cease and desist from future violations, and required to pay civil penalties.

Deputy Chief of the SEC’s Division of Enforcement Public Finance Abuse Unit, Rebecca Olsen, emphasized the importance of bookkeeping requirements in facilitating Commission inspections and examinations of municipal advisors.

Beyond financial remedies and recordkeeping violations, 2024 was a substantial year for the Commission in terms of enforcement. The SEC issued orders barring 124 individuals from serving as officers and directors of public companies. The Commission also received a record-breaking 45,130 tips, complaints, and referrals, with over 24,000 whistleblower tips submitted by two individuals.

The diverse enforcement actions taken in fiscal year 2024 demonstrate the Division’s ability to address emerging threats. Acting Deputy Director of the Division of Enforcement, Sam Waldon, praised the dedicated staff who tirelessly work to hold wrongdoers accountable, promote compliance, and instill investor trust in the markets.