Measuring the Impact of SEC Enforcement Decisions

By Stephen J. Choi

This Article examines several metrics of Securities and Exchange Commission (SEC) decision-making that may be updated on a regular basis using publicly available data to give a picture of how SEC decision-making changes. This Article focuses on SEC actions against public companies and subsidiaries of public companies, using data from 2005 to 2018. The metrics include: the number of SEC actions per year and per month, the ratio of SEC actions to securities class actions by year, the mean abnormal return from an event study of the first public announcement of the problem that led to the eventual SEC enforcement action by year, the fraction of SEC actions with prior disclosure of the underlying violation by year, and the variability of a defendant company’s stock price reaction to the initiation of an SEC action by year. The metrics cannot demonstrate what motivates internal SEC enforcement decisions with certainty but may raise questions that guide future research.