2017 will most likely be remembered as a year of transition, as the Securities and Exchange Commission's enforcement actions indicate, at least in the near term, an emphasis on specific initiatives and retail investor protections, rather than the highly technical, non-fraud investigations dominant in recent years. Still, public companies should remain vigilant regarding potential risks, and continue to implement and maintain strong, robust controls.

We are pleased to present our annual review of enforcement activity relating to financial reporting and issuer disclosures. Much like prior reviews, this update focuses principally on the Securities and Exchange Commission ("SEC") but also discusses other relevant trends and developments.

Acting on the vision outlined by new Chairman Jay Clayton, the SEC has adopted a more measured enforcement posture and articulated a heightened focus on specific initiatives and programs. In the SEC's year-end enforcement overview, the Enforcement Division's Co-Directors reiterated Chairman Clayton's guiding message that the mission of the SEC "starts and ends with the long-term interests of the Main Street investor."1 The other core principles outlined by the Co-Directors, which are discussed in various portions of this White Paper, include: focusing on individual accountability, keeping pace with technological change, imposing sanctions that further enforcement goals, and constantly assessing the allocation of the SEC's resources.2 Newly confirmed Commissioners Hester Peirce and Robert J. Jackson, Jr., whose confirmations now give the SEC a full commission for the first time since 2015, suggested that these principles will continue to be the pillars of enforcement moving forward into 2018.

From a statistical standpoint, enforcement actions decreased by almost 19 percent over the past year, dropping from 548 stand-alone actions in the SEC's Fiscal Year ending September 30, 2016 ("FY2016") to 446 in FY2017.3 (See chart 1.) In its annual review, the SEC attributes this drop-off primarily to the expiration of the SEC's Municipalities Continuing Disclosure Cooperation ("MCDC") Initiative, a voluntary self-disclosure program under which approximately 84 actions were brought in 2016.4 Moreover, it is common to see some drop-off in enforcement matters during transition periods between new Commission chairpersons.

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Footnotes

1 Annual Report: A Look Back at Fiscal Year 2017, SEC Division of Enforcement, 1 (Nov. 15, 2017) (SEC's fiscal year runs from October 1 to September 30).

2 Id. at 2.

3 Id. at 6.

4 Id. at 6.

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