While the number of penalties imposed by Securities and Exchange Commission administrative law judges is down this year, the dollar amounts are up.
There have been more penalties over $2 million imposed this year than in any of the previous three years. In April, Administrative Law Judge Jason S. Patil imposed a civil penalty of $12,777,395.80 against a broker who sold unregistered securities and absconded with investor funds to pay personal expenses—the largest penalty to date this year.
The number of initial decisions rendered by ALJs to date in 2016 is slightly behind the pace of the last two years. The current year is also seeing fewer decisions in which the ALJ imposed civil money penalties. Judges imposed penalties in 21 cases in 2015, while there have been only eight penalties imposed so far in 2016.
So what issues are coming before the ALJs?
As in 2015, ALJs entered initial decisions on more charges based on material misstatements, misrepresentations or omissions than on any other issues. Through July 26, 2016, in-house SEC judges ruled on 20 charges arising from these violations. Violations based on engaging in a fraudulent scheme represented the next largest source of charges in ALJ initial decisions, with 13 charges decided. Rounding out the list of the top five issues found in initial decisions so far in 2016 were investment advisory fraud (8 charges), dealing in unregistered securities (7 charges) and failure to register as a broker or dealer (six charges).
The results through the first seven months of 2016 are somewhat comparable to last year. Material misstatements, misrepresentations or omissions, fraudulent schemes and investment advisory fraud all appeared on the top five issue list for 2015. Two different categories of violations made the 2015 list, however, as there were 13 wire fraud charges and 11 charges arising from recordkeeping issues.
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