Faced with unrelenting criticism from financial reform groups for failing to enforce the securities laws, SEC Chair Mary Jo White has defended herself with numbers. The Securities and Exchange Commission recorded 755 different enforcement actions yielding $4.1 billion in monetary penalties in 2014, she boasted in a speech this February — “the highest number of cases in the history of the Commission.” But the numbers she cited were “deeply flawed,” according to a study that will soon be published in the Cornell Law Review. The commission’s methodology allows for double- and even triple-counting some offenders — along with counting fines ordered by other agencies, and penalties that are never collected. If you weed out the systematic over-counting and artificial boosts, the SEC’s enforcement levels have not significantly changed since 2002, despite the multitude of lawbreaking that led to the 2008 financial crisis, according to the study.

“Inflated statistics … suggest that the SEC is a much more serious enforcer in the financial industry than it really is,” writes Urska Velikonja , an assistant professor at Emory University School of Law and the author of the report. Velikonja said that she is scheduled to meet with SEC Enforcement Director Andrew Ceresney this week. “That a government agency charged with insuring the integrity of corporate reporting should fudge its own numbers is troubling,” said Bartlett Naylor, financial policy advocate for Public Citizen. Velikonja reviewed 9,679 enforcement actions listed in SEC annual reports from 2000 to 2014, a near-equal split between Democratic and Republican control. And the same tricks were used year after year to show more enforcement, against more defendants, ordering larger monetary penalties. For example, the SEC includes in its enforcement statistics what Velikonja calls “follow-on” actions, such as barring offenders from various professional associations, or revoking registrations of broker-dealers or investment advisers, or preventing individuals from appearing as an attorney or auditor before the SEC. These follow-on actions are all based on a “primary enforcement action against the same offender based on the same set of facts,” Velikonja writes. Yet they are counted separately. The SEC, for instance, followed a civil action against Robert A. Gist in 2013 for defrauding clients of $5.4 million with an associational bar and a suspension of Gist’s ability to practice law before the SEC. All three of these actions are counted in the SEC’s 2013 tally. This double- and triple-counting boosts the overall enforcement total from 2000 to 2014 by 23 to 34 percent. Similarly, when the SEC brings the same action before a federal court and an internal administrative law judge, it counts both actions. When an initial proceeding is discontinued for the failure to serve the complaint, it’s still counted. When the SEC brings contempt proceedings against individuals for failing to comply with prior enforcement actions, like failing to pay fines, they are also counted separately. Velikonja also criticizes the inclusion of delinquent filing cases in the enforcement numbers. When a public company misses a deadline to supply the SEC with financial statements, that can lead to “pump-and-dump” schemes, where investors hype up worthless investments to make a profit. But these are easy cases to bring, usually resolved by default. They are not an indicator of heightened enforcement. Delinquent filing cases have grown since 2005, from 10 to over 100 per year. Thirty-five percent of all defendants prosecuted in 2013 were from delinquent filing cases. If follow-on, contempt proceedings and delinquent filing cases are subtracted, the overall tallies show that enforcement is at about 2002 levels, Velikonja said.