Another year, another record-setting amount recovered by the U.S. Securities and Exchange Commission’s (SEC) Division of Enforcement (Enforcement).
The SEC recently closed its fiscal year 2024 with Enforcement recovering $8.2 billion in financial remedies, far and away Enforcement’s largest recovery in any fiscal year. Enforcement reached this milestone on the heels of recovering $6.4 billion and $4.9 billion in fiscal years 2022 and 2023, respectively. Previously, the highest and second highest amounts recovered in any fiscal year in the SEC’s history.1
What is more, Enforcement notched its new record-setting amount recovered in 2024 while bringing only 583 enforcement actions, far fewer than the 760 and 784 enforcement actions that the SEC brought in 2022 and 2023, respectively. Part of the explanation is that approximately $4.5 billion of the $8.2 billion recovered in 2024 came from a single jury trial. Regardless, when considering these statistics, directors and officers (D&O) insureds should note two important points:
First, in the press release announcing Enforcement’s FY 2024 results, Acting Director of Enforcement Sanjay Wadhwa cited Enforcement’s “countless investigations” that did not result in enforcement actions and thus that the SEC’s FY 2024 “numbers do not reflect.” In other words, Enforcement has been even more active in investigating potential malfeasance than the lawsuit filings alone might suggest.
Second, while some commentators believe that the SEC will become less active and more laissez-faire under President Trump, the data actually belies that suggestion. Indeed, the enforcement action statistics over the past few years under President Biden pale in comparison to Enforcement’s 821 enforcement actions in FY 2018 and 862 enforcement actions in FY 2019—during the last Trump administration. That, coupled with the fact that Enforcement received 45,130 tips, complaints, and referrals in FY 2024—the most ever received in a single year—provide good reason to expect Enforcement to remain as active as ever, regardless of the impending administration change.
Given the SEC’s robust enforcement activity, companies with SEC exposure and their respective D&Os should carefully consider and regularly audit the contours of their D&O liability insurance coverage. Chief among such considerations, at least for public companies, is whether to purchase coverage for the costs that the company incurs in its own right in responding to SEC and other securities investigations—something not traditionally covered on public D&O policies, but now becoming more widely available in various permutations, usually for an additional premium. Another consideration for public companies and their D&Os is who qualifies as an “Insured Person,” the definition of which generally is narrower in public company D&O forms than in private company forms. Equally important is the scope of the “Loss” definition—and whether and to what extent fines and penalties are included, something which (again) varies from form to form. An experienced broker can help navigate these and other important considerations.
If you have any questions about your coverage or are interested in obtaining coverage, please contact your Aon broker.
1 SEC.gov | SEC Announces Enforcement Results for Fiscal Year 2024
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