SEC Q3 Stats Show 2016 ALJ Decisions Lagging Behind

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By Cameron Finch

Oct. 5 — The number of initial decisions by Securities and Exchange Commission administrative law judges is falling—only 41 decisions were issued as of the end of the third quarter, compared with 53 decisions at the same time last year.

Not only are initial decisions on the decline, civil penalties were ordered in fewer cases than in 2015. Last year, civil penalties were imposed in 16 of the initial decisions as of the end of the third quarter, or approximately 30 percent. This year, ALJs have imposed civil penalties in only nine out of 41 initial decisions—21.9 percent.

When compared with Q3 in 2015, there have been 12 fewer initial decisions rendered at this point in 2016. The trend may indicate that challenges to the constitutionality of the agency's administrative forum have prompted the commission to pursue more cases in the federal courts rather than in-house.

Although penalties are down
Disgorgement Increasing

Although penalties are down, disgorgement was ordered in a larger percentage of cases than at the same point in 2015. ALJs are requiring defendants to disgorge proceeds in 30 percent of cases, up from slightly less than 23 percent at the end of Q3 2015.

With another quarter still left in the fiscal year, ALJs have ordered disgorgement in 12 decisions, compared with 14 decisions ordering the remedy at the end of 2015.

Top ALJ Enforcement Issues

As in Q2, material misrepresentations and omissions are the most frequently alleged misconduct in administrative enforcement proceedings. There have been eight new enforcement actions based on this issue, up from 30 actions—or a 40 percent increase from the second quarter.

Registration violations, which include dealing in securities without being registered and dealing in unregistered securities, account for 30 percent of this year's enforcement actions as of the end of the third quarter. The issue was raised in 21 proceedings in the third quarter, up from 13 proceedings in Q2—a 5 percent increase.

Bloomberg Law data tracks all administrative actions filed since the beginning of 2013 except for proceedings against defunct companies that are delinquent in their periodic filings. The data doesn't include proceedings still within the 21-day period for appeal to the commission. Cases currently on appeal are included even if the commission hasn't issued a final opinion. The data is updated on a quarterly basis.

To contact the reporter on this story: Cameron Finch in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

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