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Many people wonder why the US Securities & Exchange Commission (SEC) has been so successful, which has anequivalent agency in Brazil. The reason for its effectiveness is not hard to understand: the agency does not hesitate to investigate and impose penalties to curb irregularities that impact the day-to-day operations of the US stock market, including instances of corruption.
In 2023, the SEC announced that it took a total of 784 enforcement actions, which is 3% more than in 2022. Additionally, the agency initiated 162 administrative proceedings aimed at preventing or suspending certain individuals from specific roles in the US securities market, based on criminal convictions and civil injunctions. Finally, the SEC also filed 121 actions against stock issuers who failed to submit the required filings to the agency.
1.1. THE ROLE OF WHISTLEBLOWERS
To achieve such effectiveness, the SEC relies on the assistance of its own investors and the increasing confidence of the general public. This, in turn, requires the agency to act with greater urgency, ensuring that any complaint will not be disregarded. On the contrary, each complaint will prompt a thorough internal investigation, and if any irregularity is found, severe penalties will be imposed by the agency.
Indeed, it's important to highlight that 2023 marked a record year for the SEC Whistleblower Program. The agency issued nearly $600 million in awards to whistleblowers, including the largest amount ever paid to a whistleblower, totaling $279 million. The program's success is evident as the SEC received approximately 18,000 complaints in 2023 alone, surpassing the previous record of 12,300 complaints in 2022 by about 50%. If we consider contacts of other natures with whistleblowers, the total number of interactions rises to 40,000 in 2023.
1.2. FOREIGN CORRUPT PRACTICES ACT
Regarding violations of the Foreign Corrupt Practices Act (FCPA), the US anti-corruption law, the SEC has made it clear that this is one of its priorities. Since 2010, the agency has established a specialized division for enforcing penalties and has successfully imposed penalties on the following companies:
1.3. THE COLLABORATION OF THE INVESTIGATED MAKES THE DIFFERENCE
The SEC has also shown that cooperation from those under investigation can make a difference. Rewards for cooperation have been granted in cases involving public equity issuers, private companies, and consulting firms, covering a range of violations including material misstatements, record-keeping violations, undisclosed privileges, and violations of whistleblower protection rules. The following examples are notable:
1. The SEC resolved charges against telecommunications company GTT Communications, Inc. for failing to disclose material information about unsubstantiated adjustments made to various Commission filings, which inflated GTT's reported operating profit by at least 15% over three quarters. The SEC's order acknowledged GTT's prompt self-reporting, affirmative corrective action, and substantial cooperation with the SEC, resulting in the agency not imposing a civil penalty against GTT.
2. The SEC resolved charges against broker Perella Weinberg as part of the agency's initiative to investigate violations of the recordkeeping provisions of federal securities laws. Perella Weinberg reported the conduct and agreed to pay a $2.5 million civil penalty to settle the allegations. Other companies charged in the initiative, but didn't self-report, agreed to pay substantially higher civil penalties to resolve the charges.
3. The SEC also resolved charges against View, Inc., a publicly traded maker of "smart" windows, for failing to disclose $28 million in warranty-related liabilities. No civil penalties were imposed against View because the company reported the conduct to the SEC, took prompt corrective action, and cooperated with the staff's investigation. According to the established order, after self-reporting the conduct, View assisted agency personnel by providing detailed financial analyses, explanations, and summaries of factual matters; proactively identified important documents and witnesses; and responded to several team requests without requiring subpoenas.
These examples are essential in illustrating that honesty should always be credited. Despite failures, errors, or even fraud committed by certain employees, it's evident that the company does not condone or endorse such practices.
