A recently published study confirmed what many proactive institutional investors already know: Private litigation is an integral piece of the securities enforcement puzzle. In the United States, the Securities and Exchange Commission (SEC) is the principal regulator tasked with overseeing the financial markets and the sale of securities.
As with all government regulators, the SEC suffers from limited staffing and resources, and is subject to political pressures, which forces the agency to make difficult choices about the companies and individuals it investigates. Although the need to prioritize investigations and allocate resources is not itself problematic, a recent study revealed that it is the investigations and cases that involve the largest shareholder losses that suffer most as a result of the SEC’s backlog. See Samuel B. Bonsall IV et al., Wearing Out the Watchdog: The Impact of SEC Case Backlog on the Formal Investigation Process (2021).
