Bipartisan Bill Increases SEC Fines for Violations

U.S. Senators Chuck Grassley (R-IA), ranking member of the Senate Judiciary Committee, and Jack Reed (D-RI), chairman of the Senate Banking Subcommittee on Securities, Insurance and Investment, will introduce legislation intended to increase the SEC fines for securities violations. Currently, the SEC can only penalize an individual up to $150,000 per offense and up to $725,000 per offense for firms. The Stronger Enforcement of Civil Penalties Act (SEC Penalties Act) of 2012 will increase the per violation cap to $1 million for individuals and $10 million for entities.

Senator Grassley summed up the purpose of the bill when, he stated: “If a fine is just decimal dust for a Wall Street firm, that’s not a deterrent; [i]t’s just the cost of doing business. A penalty should mean something, and it should get the recidivists’ attention.  I especially like the increased penalties for repeat offenders in this bill.   That should help change the dynamic of business as usual.  If this legislation is enacted, as I hope it will be, I expect the SEC to use these new penalties.  The SEC doesn’t always use all of the penalties at its disposal, and it should.”

Mr. Grassley’s reference to the repeat offenders highlights a provision in the SEC Penalties Act that allows the maximum amount of the penalty to be three times the applicable cap when the person or entity, within the five years preceding the act has been criminally convicted of securities fraud or subject to a judgment or order concerning securities fraud.

For additional information, please contact Andrew Deddeh at (619) 278-0020 or andrew.deddeh@corecls.com.