The U.S. Securities and Exchange Commission's metrics for computing annual enforcement statistics are "deeply flawed," making the agency falsely appear as though it is getting tougher every year, a new academic study concluded.
The draft study by Emory University law professor Urska Velikonja, slated to be published in the Cornell Law Review, examined 15 years worth of SEC enforcement data.
It found that a host of problems, including double-counting cases, has enabled the SEC to "mask the fact that core enforcement has remained steady since 2002."
"They way that the SEC counts enforcement actions filed and aggregate monetary penalties ordered consistently overstates the SEC's enforcement output, masks trends, obscures real problems in enforcement, and reveals non-existent 'problems' that the SEC then tries to resolve," the study said.
SEC Enforcement Director Andrew Ceresney said the agency disagrees with a number of observations in the study, which it was still reviewing.
"We have consistently and transparently reported our enforcement numbers for years, but as we have emphasized, first and foremost is the quality of our cases, which span the securities industry, include first-of-their kind actions, aggressive use of industry and other types of bars, and demonstrate successful pursuit of wrongdoers," he said in a statement.
The fiscal year 2015 will end on Sept. 30, and the SEC is expected to report its annual statistics as soon as October.
The study criticized the SEC for counting multiple enforcement actions separately, even if they arise out of the same case. For instance, it said the SEC may charge a company in federal court, then file a handful of separate actions to bar individuals from the industry for misconduct in the same matter.
It also said the SEC has ramped up the number of "easy-to-bring delinquent filing cases," in which a company fails to file timely financial reports as required by law.
These are strict liability cases, meaning the agency need not show a company intended to violate the law.