SEC Penalties Fall in Trump’s First Year: Study

Not only did penalties go down in the aggregate for fiscal 2017 compared with the year earlier, but the median fine did as well, falling 35%, according to Velikonja's analysis. She attributes that drop to the Republican view that corporate fines harm shareholders, who often have already been hurt when allegations of wrongdoing drive down companies' stock price.

For his part, Clayton, who spent his career at law firm Sullivan & Cromwell LLP, has said the SEC won't let up on enforcement and will be particularly focused on violations that affect mom-and-pop investors. There may also be other explanations for the drop in fines.

Rebuilding Pipeline

Cases brought by the SEC can often take years to develop, and agency leadership often strives to finish high-profile investigations as presidential administrations draw to a close. Clayton's enforcement team could now be in the position of rebuilding its pipeline of cases, with settlements against companies and individuals coming some time in the future.

For instance, in the first fiscal year of the Obama administration, the SEC sought $2.4 billion in penalties. In subsequent years, that number steadily rose as the agency pursued cases stemming from the 2008 financial crisis.

In June, Clayton named as co-directors of the enforcement division Stephanie Avakian, who had been acting head of the unit, and Steven Peikin, a former federal prosecutor and who also worked at Sullivan & Cromwell.

Avakian and Peikin have signaled that they plan to focus on computer crime and violations targeting individual investors. In September, the SEC said the enforcement division was forming a unit to focus on hacking and other online threats and a separate task force to identify misconduct focused on retail investors.

Many of the actions brought by SEC enforcement lawyers stem from referrals from the agency's Office of Compliance Inspections and Examinations, which has historically conducted wide-ranging sweeps to ensure firms are complying with rules. That unit went months with out a permanent leader before Clayton appointed acting director Peter Driscoll to the post last month. 

The SEC's financial cops are also having to do more with less. Earlier this year, the agency cut back on non-essential travel, imposed a hiring freeze and curbed the use of outside contractors who assist lawyers with cases. And until Clayton was confirmed, the SEC was down to two commissioners who voted on cases; one Republican and one Democrat. Without a tiebreaker vote, many cases were left in limbo for months.

– With assistance from Anders Melin.

— Check out SEC's Top 3 Enforcement Priorities on ThinkAdvisor.