The average number of accounting and auditing enforcement actions initiated per year during Jay Clayton’s tenure as Securities and Exchange Commission (SEC) chair was higher than during Gary Gensler’s, according to an analysis by Cornerstone Research.
During the Clayton era, 74 actions per year were initiated on average, compared to Gensler’s 60, a 19% decrease.
Clayton, appointed by President Trump during his first term, served at the SEC from May 2017 to December 2020.
Gensler, named by President Biden, served from April 2021 to January 2025.
There was a 30% decrease in the average number of individual respondents and a 21% decrease in the average number of firm respondents, according to the report, which was published on March 12, 2025.
Although the average number of SEC enforcement actions went down, Cornerstone said that the actions involving auditors and audit firms remained steady at 21% per year during both the Clayton and Gensler years.
The average fines also decreased by 19% from $796 million per year during Clayton’s leadership to $647 million during Gensler’s tenure.
However, the percentage of respondents fined per year increased a little bit during Gensler’s time at 83% compared to Clayton’s at 79%.
The smaller number during Gensler’s period was in part due to the sharp drop in accounting and auditing enforcement in the last fiscal year.
“After two consecutive years of increases in accounting and auditing enforcement actions, actions initiated in FY 2024 decreased by 46% under Chair Gensler,” the report said.
The SEC initiated a total of 45 actions in fiscal 2024, which is only 54% of the total actions initiated in fiscal 2023.
Moreover, the commission dismissed six administrative proceedings after the Supreme Court’s June 2024 ruling in SEC v. Jarkesy, deeming the commission’s use of in-house court to seek monetary penalties was unconstitutional.
However, in fiscal 2024 the total fines in fiscal 2024 was $771 million, the highest total since 2021. In fiscal 2024 the median monetary settlement for firms went up to $4.45 million, which a 27% increase from fiscal 2023.
“Unlike other enforcement priorities during the Gensler Period, such as cryptocurrency and off-channel communications, SEC accounting and auditing enforcement activity generally declined compared to the Clayton Period,” the report states.
Areas of Allegations
Cornerstone also looked at the areas of allegations, and the most common ones in fiscal 2024 were revenue recognition and internal control over financial reporting (ICFR). Almost two thirds, or 58% of the actions alleged either one or both violations.
In fiscal 2024 nine actions were about violations of both internal accounting controls and disclosure controls and procedures, which was below the average of 14 cases per year during the first three fiscal years when Gensler headed up the agency.
“The number of actions alleging violations of internal accounting controls decreased to its lowest level since FY 2021,” the report states.
Cornerstone also found that five actions in fiscal 2024 alleged violations of Section 304 of the Sarbanes-Oxley Act of 2002, which is known as the clawback provision. In fiscal 2023, the number was three, but five is consistent with the yearly average initiated from fiscal 2017 to fiscal 2023.
This article originally appeared in the March 26, 2025, edition of Accounting & Compliance Alert, available on Checkpoint.
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