Demystifying the economy | What the SEC does with its billions in fines

“TD Bank has been fined billions by the Securities and Exchange Commission (SEC) in the United States. What does the SEC do with this money? » – Martin Paquet

First, a little clarification: the record fine of US 3.09 billion that TD agreed to pay on October 10 in the United States was not imposed by the Securities and Exchange Commission (SEC), but by several U.S. regulatory authorities, including the federal Department of Justice and the Chief Attorney for the District of New Jersey.

The question regarding the SEC remains interesting, and what better way to answer it than to go to the sources?

From 1^is October 2022 to September 30, 2023, the SEC announced in its most recent report that it had collected US$4.9 billion in “financial remedies” (“financial remedies”). financial remedies “). This was the second largest amount imposed by the SEC, after the record US$6.4 billion recorded in 2022. One of the main sources of revenue in 2023 was the fine of more than US$400 million imposed on 25 brokerage firms and credit agencies, including Wells Fargo, HSBC and Scotia Capital. They were accused of having violated federal laws, in particular allowing employees to use personal means of communication, such as WhatsAppto exchange confidential information.

Whistleblowers and victims

What did the SEC do with all those billions? Until 2002, the answer would have been relatively simple: all the money collected in fines and penalties was paid into the General Fund of the American Treasury, the equivalent of our Consolidated Fund in Quebec. These sums were then redirected to various state expenditures, according to government decisions and without any specific allocation obligation.

Since 2002, in the United States, the Sarbanes-Oxley Act has allowed the SEC to pay part of its revenues for more specific mandates. The largest discretionary budget item in 2023 was the payment of US930 million to injured investors. We do not give the details of these compensations, linked to the 784 prosecutions and administrative penalties imposed by the SEC that year.

The second item is rather surprising seen from Quebec: more than 600 million US dollars were paid to whistleblowers. The SEC, it is specified, received in 2023 some 18,000 pieces of information from what we call in English whistleblowers.

And the sums paid to these whistleblowers, who are obviously not named, are very significant. Only one of them was entitled to the tidy sum of US 279 million, which was announced in a press release on May 5, 2023. This was a record, exceeding the peak reached in October 2020 with a payment of 114 million US.

In 2023, the SEC issued 11 press releases reporting such payments. Whistleblowers, it is explained, may be entitled to rewards representing “between 10 and 30%” of the sums collected in financial sanctions amounting to more than 1 million US dollars.

And we do not skimp on the protection granted to whistleblowers: on February 3, 2023, Activision Blizzard agreed to pay US 35 million after the SEC accused it of having violated the law, in particular by requiring former employees to They report any request for information from the commission.

“Financially neutral”

There is no similar mechanism in Quebec, where the amounts are far from comparable. From 1^is April 2023 to March 31, 2024, the Financial Markets Authority (AMF) reported 12.1 million in fines, penalties and administrative sanctions. The total paid in “restitution of sums to victims”: $57,411. As for the 107 information from whistleblowers, they did not result in any reward, confirms AMF spokesperson Sylvain Théberge.

Theoretically, the rest of the SEC’s “revenue”, some US$3.4 billion, is paid to the US Treasury. This is not quite the end of the story: this commission must submit its budget requests to Congress each year.

For its 5,073 full-time equivalent employees and its operations, the SEC has requested a budget of 2.6 billion US dollars in 2025. This allows the commission to present itself as “neutral from a deficit point of view” (“deficit-neutral”). deficit neutral “), its expenses being largely offset by the funds paid to the Treasury.