U.S. Senators Chuck Grassley (R-Iowa) and Jack Reed (D-R.I.) introduced a bipartisan bill this week that would allow the Securities and Exchange Commission to impose much higher civil monetary penalties against individuals and financial firms that violate securities laws. The measure is called the Stronger Enforcement of Civil Penalties Act of 2015.
Senator Grassley said that the current SEC fines are “decimal dust,” which don’t serve as much of a deterrent. He said that a penalty “should mean something.” He and Senator Reed said they want to enhance investor protections. As Mr. Reed pointed out, over half of American households own securities, with many dependent on the market for their retirement and their kids’ college education. He said that investors shouldn’t have to incur substantial losses while violators get away with a “slap on the wrist.”
Under the new bill, the SEC would be able to impose up to $1 million against individuals for every serious offense as long as the penalty isn’t already tied to illegal funds that that the person received. Serious offenses would include deceit, fraud, deliberately ignoring regulations, and manipulation. The current maximum penalty for individuals over such offenses is $160,000.
Meantime, the current maximum penalty for entities that commit serious securities law violations is $775,000. That amount would be upped to $10 million. Repeat offenders who committed their violations within a five-year period could be subject to three times the penalty cap.
The measure also would let the SEC impose fines in cases filed in federal court as well as those in its administrative proceedings. Currently, the SEC is allowed to impose penalties the equivalent of how much an investor was harmed but only for cases filed in court.
Senators Offer Bipartisan Bill to Increase SEC Civil Penalty Limits, The Bond Buyer, July 9, 2015
Bill Seeks Tougher Penalties for Wall Street Fraud, Grassley.Senate.Gov, July 9, 2015