Driven. Creative. Strategic. Focused.

Even as SEC Enforcement Actions Rise, Insider Trading Charges Dip

On Behalf of | Dec 21, 2020 | Regulatory Issues (SEC, FINRA)

Over the past 35 years, the overall number of enforcement actions taken annually by the SEC has consistently risen. In 1985, the SEC brought about 300 such actions. In recent years, that number has hovered above 800. In 2019, the SEC took 862 total enforcement actions, according to an analysis by NPR. That is the second-highest figure in the past three decades.

One type of case, however, became noticeably less frequent: Insider trading.

2019 saw the fewest insider trading cases since 1996

Even as the SEC’s overall number of enforcement actions rose last year, allegations of insider trading dropped significantly. There were 32 total insider trading cases in 2019, the fewest since 1996. This resulted in charges against 46 individuals, roughly half the usual yearly figure over the past 30 years.

The significant reduction occurred as the SEC narrowed its enforcement focus on practices that target individual investors (such as Ponzi schemes and unscrupulous advisers), as well as cyber-related fraud. Stock traders would be wise, however, to remain diligent.

SEC says economic swings present opportunity for illegal securities trading

Despite the decline in insider trading enforcement actions, the SEC has routinely signaled that it will continue to pursue such cases against individuals and companies.

Earlier this year, the agency issued a warning of sorts, noting that the economic swings in recent months present ample opportunity for insider trading. SEC officials specifically point to earnings reports and filings that have been delayed due to external conditions, perhaps giving corporate insiders a leg up.

“Those with such access … should be mindful of their obligations to keep this information confidential and to comply with the prohibitions on illegal securities trading,” the SEC said.

If you have questions or concerns regarding the applicability of insider trading regulations, reach out to Ford O’Brien. Our securities law attorneys represent clients in New York and Nationwide.

Source: NPR, “Under Trump, SEC Enforcement Of Insider Trading Dropped To Lowest Point In Decades,” Aug. 14, 2020

Source: U.S. Securities and Exchange Commission public statement, “Statement from Stephanie Avakian and Steven Peikin, Co-Directors of the SEC’s Division of Enforcement, Regarding Market Integrity,” March 23, 2020