|U.S. corporate fraud may be greater than thought, study suggests |
A study, led by Alexander Dyck, a finance professor at the University of Toronto, suggests U.S. corporate fraud, “like an iceberg,” may be greater than thought. The research found that only about a third of frauds in public companies are ever identified, and that fraudulent activity is more common than previously assumed. About 40% of companies are committing accounting violations and 10% are committing securities fraud, destroying 1.6% of equity value each year — equivalent to about $830bn in 2021. “Fraud is indeed like an iceberg, with significant undetected fraud beneath the surface,” the study says. Reuters notes that the Securities and Exchange Commission (SEC) has stepped up its enforcement of fraudulent activity. In the agency's 2022 report on enforcement actions, the regulator filed 760 enforcement actions and recovered a record $6.4bn in penalties and disgorgement, a 9% increase over the prior year, and included 462 new, or “stand alone,” enforcement actions, a 6.5% increase over fiscal year 2021. “The SEC’s stand-alone enforcement actions in fiscal year 2022 ran the gamut of conduct, from ‘first-of-their-kind’ actions to cases charging traditional securities law violations,” the agency said.