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Bill Allows SEC to Greatly Boost Fines

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Sens. Jack Reed, D-Rhode Island, and Chuck Grassley, R-Iowa, introduced legislation Thursday that gives the Securities and Exchange Commission the “firepower it needs” to crack down on Wall Street fraud and punish repeat offenders by levying heftier penalities.

The Stronger Enforcement of Civil Penalties Act (SEC Penalties Act) of 2015 increases the statutory limits on civil monetary penalties, directly linking the size of these penalties to the scope of harm and associated investor losses, and substantially raising the financial stakes for repeat securities law violators.  

Under existing law, the SEC in some cases can only penalize individual violators a maximum of $160,000 per offense and institutions $775,000.

In other cases, the SEC may calculate penalties to equal the gross amount of ill-gotten gain, but only if the matter goes to federal court, not when the SEC handles a case administratively.  

The SEC Penalties Act increases the per-violation cap applicable to the most serious securities laws violations to $1 million per violation for individuals and $10 million per violation for entities.  

The bill would also triple the penalty cap for recidivists who have been held criminally or civilly liable for securities fraud in the last five years. The agency would be able to assess these types of penalties in-house, and not just in federal court.   “More than half of all U.S. households own securities,” said Reed, a senior member of the Senate Banking Committee. “They depend on the market to help secure their retirement and send their kids to college. They shouldn’t have to suffer undue risk or incur losses while securities law violators get away with a slap on the wrist.”

Grassley, also a member of the Senate Banking Committee, added in the statement that “if a fine is just decimal dust for a Wall Street firm, that’s not a deterrent. It’s just the cost of doing business. A penalty should mean something, and it should get the recidivists’ attention.”

The increased penalties for repeat offenders in the bill “should help change the dynamic of business as usual.”

Under the bill, the maximum amount of the penalty would be tripled for repeat offenders.

— Check out 8 Top Concerns of SEC Investor Advocate on ThinkAdvisor.


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