II
112th CONGRESS
2d Session
S. 3416
IN THE SENATE OF THE UNITED STATES
July 23, 2012
Mr. Reed (for himself and Mr. Grassley) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs
A BILL
To enhance civil penalties under the Federal securities laws, and for other purposes.
Short title
This Act may be cited as the
Stronger Enforcement of Civil
Penalties Act of 2012
.
Updated civil money penalties for securities laws violations
Securities Act of 1933
Money penalties in administrative actions
Section 8A(g)(2) of the Securities Act of 1933 (15 U.S.C. 77h–1(g)(2)) is amended—
in subparagraph (A)—
by
striking $7,500
and inserting $10,000
; and
by
striking $75,000
and inserting $100,000
;
in subparagraph (B)—
by
striking $75,000
and inserting $100,000
;
and
by
striking $375,000
and inserting $500,000
;
and
by amending subparagraph (C) to read as follows:
Third tier
Notwithstanding subparagraphs (A) and (B), the amount of penalty for each such act or omission shall not exceed the greater of—
$1,000,000 for a natural person or $10,000,000 for any other person;
3 times the gross amount of pecuniary gain to the person who committed the act or omission; or
the amount of losses incurred by victims as a result of the act or omission, if—
the act or omission described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and
such act or omission directly or indirectly resulted in—
substantial losses or created a significant risk of substantial losses to other persons; or
substantial pecuniary gain to the person who committed the act or omission.
.
Money penalties in civil actions
Section 20(d)(2) of the Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is amended—
in subparagraph (A)—
by
striking $5,000
and inserting $10,000
; and
by
striking $50,000
and inserting $100,000
;
in subparagraph (B)—
by
striking $50,000
and inserting $100,000
;
and
by
striking $250,000
and inserting $500,000
;
and
in subparagraph
(C), by striking greater of (i) $100,000 for a natural person or
$500,000 for any other person, or (ii) the gross amount of pecuniary gain to
such defendant as a result of the violation
and inserting the
following:
greater of—
$1,000,000 for a natural person or $10,000,000 for any other person;
3 times the gross amount of pecuniary gain to such defendant as a result of the violation; or
the amount of losses incurred by victims as a result of the violation
.
Securities Exchange Act of 1934
Money penalties in civil actions
Section 21(d)(3)(B) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(B)) is amended—
in clause (i)—
by
striking $5,000
and inserting $10,000
; and
by
striking $50,000
and inserting $100,000
;
in clause (ii)—
by
striking $50,000
and inserting $100,000
;
and
by
striking $250,000
and inserting $500,000
;
and
in clause (iii),
by striking greater of (I) $100,000 for a natural person or $500,000 for
any other person, or (II) the gross amount of pecuniary gain to such defendant
as a result of the violation
and inserting the
following:
greater of—
$1,000,000 for a natural person or $10,000,000 for any other person;
3 times the gross amount of pecuniary gain to such defendant as a result of the violation; or
the amount of losses incurred by victims as a result of the violation
.
Money penalties in administrative actions
Section 21B(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78u–2(b)) is amended—
in paragraph (1)—
by
striking $5,000
and inserting $10,000
; and
by
striking $50,000
and inserting $100,000
;
in paragraph (2)—
by
striking $50,000
and inserting $100,000
;
and
by
striking $250,000
and inserting $500,000
;
and
by amending paragraph (3) to read as follows:
Third tier
Notwithstanding paragraphs (1) and (2), the amount of penalty for each such act or omission shall not exceed the greater of—
$1,000,000 for a natural person or $10,000,000 for any other person;
3 times the gross amount of pecuniary gain to the person who committed the act or omission; or
the amount of losses incurred by victims as a result of the act or omission, if—
the act or omission described in subsection (a) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and
such act or omission directly or indirectly resulted in substantial losses or created a significant risk of substantial losses to other persons or resulted in substantial pecuniary gain to the person who committed the act or omission.
.
Investment Company Act of 1940
Money penalties in administrative actions
Section 9(d)(2) of the Investment Company Act of 1940 (15 U.S.C. 80a–9(d)(2)) is amended—
in subparagraph (A)—
by
striking $5,000
and inserting $10,000
; and
by
striking $50,000
and inserting $100,000
;
in subparagraph (B)—
by
striking $50,000
and inserting $100,000
;
and
by
striking $250,000
and inserting $500,000
;
and
by amending subparagraph (C) to read as follows:
Third tier
Notwithstanding subparagraphs (A) and (B), the amount of penalty for each such act or omission shall not exceed the greater of—
$1,000,000 for a natural person or $10,000,000 for any other person;
3 times the gross amount of pecuniary gain to the person who committed the act or omission; or
the amount of losses incurred by victims as a result of the act or omission, if—
the act or omission described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and
such act or omission directly or indirectly resulted in substantial losses or created a significant risk of substantial losses to other persons or resulted in substantial pecuniary gain to the person who committed the act or omission.
.
Money penalties in civil actions
Section 42(e)(2) of the Investment Company Act of 1940 (15 U.S.C. 80a–41(e)(2)) is amended—
in subparagraph (A)—
by
striking $5,000
and inserting $10,000
; and
by
striking $50,000
and inserting $100,000
;
in subparagraph (B)—
by
striking $50,000
and inserting $100,000
;
and
by
striking $250,000
and inserting $500,000
;
and
in subparagraph
(C), by striking greater of (i) $100,000 for a natural person or
$500,000 for any other person, or (ii) the gross amount of pecuniary gain to
such defendant as a result of the violation
and inserting the
following:
greater of—
$1,000,000 for a natural person or $10,000,000 for any other person;
3 times the gross amount of pecuniary gain to such defendant as a result of the violation; or
the amount of losses incurred by victims as a result of the violation
.
Investment Advisers Act of 1940
Money penalties in administrative actions
Section 203(i)(2) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–3(i)(2)) is amended—
in subparagraph (A)—
by
striking $5,000
and inserting $10,000
; and
by
striking $50,000
and inserting $100,000
;
in subparagraph (B)—
by
striking $50,000
and inserting $100,000
;
and
by
striking $250,000
and inserting $500,000
;
and
by amending subparagraph (C) to read as follows:
Third tier
Notwithstanding subparagraphs (A) and (B), the amount of penalty for each such act or omission shall not exceed the greater of—
$1,000,000 for a natural person or $10,000,000 for any other person;
3 times the gross amount of pecuniary gain to the person who committed the act or omission; or
the amount of losses incurred by victims as a result of the act or omission, if—
the act or omission described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and
such act or omission directly or indirectly resulted in substantial losses or created a significant risk of substantial losses to other persons or resulted in substantial pecuniary gain to the person who committed the act or omission.
.
Money penalties in civil actions
Section 209(e)(2) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–9(e)(2)) is amended—
in subparagraph (A)—
by
striking $5,000
and inserting $10,000
; and
by
striking $50,000
and inserting $100,000
;
in subparagraph (B)—
by
striking $50,000
and inserting $100,000
;
and
by
striking $250,000
and inserting $500,000
;
and
in subparagraph
(C), by striking greater of (i) $100,000 for a natural person or
$500,000 for any other person, or (ii) the gross amount of pecuniary gain to
such defendant as a result of the violation
and inserting the
following:
greater of—
$1,000,000 for a natural person or $10,000,000 for any other person;
3 times the gross amount of pecuniary gain to such defendant as a result of the violation; or
the amount of losses incurred by victims as a result of the violation
.
Penalties for recidivists
Securities Act of 1933
Cease-and-desist proceedings
Section 8A(g)(2) of the Securities Act of 1933 (15 U.S.C. 77h–1(g)(2)) is amended by adding at the end the following:
Fourth tier
Notwithstanding subparagraphs (A), (B), and (C), the maximum amount of penalty for each such act or omission shall be 3 times the otherwise applicable amount in such subparagraphs if, within the 5-year period preceding such act or omission, the person who committed the act or omission was criminally convicted for securities fraud or became subject to a judgment or order imposing monetary, equitable, or administrative relief in any Commission action alleging fraud by that person.
.
Injunctions and prosecution of offenses
Section 20(d)(2) of the Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is amended by adding at the end the following:
Fourth tier
Notwithstanding subparagraphs (A), (B), and (C), the maximum amount of penalty for each such violation shall be 3 times the otherwise applicable amount in such subparagraphs if, within the 5-year period preceding such violation, the defendant was criminally convicted for securities fraud or became subject to a judgment or order imposing monetary, equitable, or administrative relief in any Commission action alleging fraud by that defendant.
.
Securities exchange Act of 1934
Civil actions
Section 21(d)(3)(B) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(B)) is amended by adding at the end the following:
Fourth tier
Notwithstanding clauses (i), (ii), and (iii), the maximum amount of penalty for each such violation shall be 3 times the otherwise applicable amount in such clauses if, within the 5-year period preceding such violation, the defendant was criminally convicted for securities fraud or became subject to a judgment or order imposing monetary, equitable, or administrative relief in any Commission action alleging fraud by that defendant.
.
Administrative proceedings
Section 21B(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78u–2(b)) is amended by adding at the end the following:
Fourth tier
Notwithstanding paragraphs (1), (2), and (3), the maximum amount of penalty for each such act or omission shall be 3 times the otherwise applicable amount in such paragraphs if, within the 5-year period preceding such act or omission, the person who committed the act or omission was criminally convicted for securities fraud or became subject to a judgment or order imposing monetary, equitable, or administrative relief in any Commission action alleging fraud by that person.
.
Investment company Act of 1940
Ineligibility of certain underwriters and affiliates
Section 9(d)(2) of the Investment Company Act of 1940 (15 U.S.C. 80a–9(d)(2)) is amended by adding at the end the following:
Fourth tier
Notwithstanding subparagraphs (A), (B), and (C), the maximum amount of penalty for each such act or omission shall be 3 times the otherwise applicable amount in such subparagraphs if, within the 5-year period preceding such act or omission, the person who committed the act or omission was criminally convicted for securities fraud or became subject to a judgment or order imposing monetary, equitable, or administrative relief in any Commission action alleging fraud by that person.
.
Enforcement
Section 42(e)(2) of the Investment Company Act of 1940 (15 U.S.C. 80a–41(e)(2)) is amended by adding at the end the following:
Fourth tier
Notwithstanding subparagraphs (A), (B), and (C), the maximum amount of penalty for each such violation shall be 3 times the otherwise applicable amount in such subparagraphs if, within the 5-year period preceding such violation, the defendant was criminally convicted for securities fraud or became subject to a judgment or order imposing monetary, equitable, or administrative relief in any Commission action alleging fraud by that defendant.
.
Investment advisers Act of 1940
The Investment Advisers Act of 1940 (15 U.S.C. 80b–1 et seq.) is amended—
in section 203(i)(2) (15 U.S.C. 80b–3(i)(2)), by adding at the end the following:
Fourth tier
Notwithstanding subparagraphs (A), (B), and (C), the maximum amount of penalty for each such act or omission shall be 3 times the otherwise applicable amount in such subparagraphs if, within the 5-year period preceding such act or omission, the person who committed the act or omission was criminally convicted for securities fraud or became subject to a judgment or order imposing monetary, equitable, or administrative relief in any Commission action alleging fraud by that person.
; and
in section 209(e)(2) (15 U.S.C. 80b–9(e)(2)) by adding at the end the following:
Fourth tier
Notwithstanding subparagraphs (A), (B), and (C), the maximum amount of penalty for each such violation shall be 3 times the otherwise applicable amount in such subparagraphs if, within the 5-year period preceding such violation, the defendant was criminally convicted for securities fraud or became subject to a judgment or order imposing monetary, equitable, or administrative relief in any Commission action alleging fraud by that defendant.
.
Violations of injunctions and bars
Securities Act of 1933
Section 20(d) of the Securities Act of 1933 (15 U.S.C. 77t(d)) is amended—
in paragraph (1),
by inserting after the rules or regulations thereunder,
the
following: a Federal court injunction or a bar obtained or entered by
the Commission under this title,
; and
by amending paragraph (4) to read as follows:
Special provisions relating to a violation of an injunction or certain orders
In general
Each separate violation of an injunction or order described in subparagraph (B) shall be a separate offense, except that in the case of a violation through a continuing failure to comply with such injunction or order, each day of the failure to comply with the injunction or order shall be deemed a separate offense.
Injunctions and orders
Subparagraph (A) shall apply with respect to any action to enforce—
a Federal court injunction obtained pursuant to this title;
an order entered or obtained by the Commission pursuant to this title that bars, suspends, places limitations on the activities or functions of, or prohibits the activities of, a person; or
a cease-and-desist order entered by the Commission pursuant to section 8A.
.
Securities exchange Act of 1934
Section 21(d)(3) of the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)) is amended—
in subparagraph
(A), by inserting after the rules or regulations thereunder,
the
following: a Federal court injunction or a bar obtained or entered by
the Commission under this title,
; and
by amending subparagraph (D) to read as follows:
Special provisions relating to a violation of an injunction or certain orders
In general
Each separate violation of an injunction or order described in clause (ii) shall be a separate offense, except that in the case of a violation through a continuing failure to comply with such injunction or order, each day of the failure to comply with the injunction or order shall be deemed a separate offense.
Injunctions and orders
Clause (i) shall apply with respect to an action to enforce—
a Federal court injunction obtained pursuant to this title;
an order entered or obtained by the Commission pursuant to this title that bars, suspends, places limitations on the activities or functions of, or prohibits the activities of, a person; or
a cease-and-desist order entered by the Commission pursuant to section 21C.
.
Investment company Act of 1940
Section 42(e) of the Investment Company Act of 1940 (15 U.S.C. 80a–41(e)) is amended—
in paragraph (1),
by inserting after the rules or regulations thereunder,
the
following: a Federal court injunction or a bar obtained or entered by
the Commission under this title,
; and
by amending paragraph (4) to read as follows:
Special provisions relating to a violation of an injunction or certain orders
In general
Each separate violation of an injunction or order described in subparagraph (B) shall be a separate offense, except that in the case of a violation through a continuing failure to comply with such injunction or order, each day of the failure to comply with the injunction or order shall be deemed a separate offense.
Injunctions and orders
Subparagraph (A) shall apply with respect to any action to enforce—
a Federal court injunction obtained pursuant to this title;
an order entered or obtained by the Commission pursuant to this title that bars, suspends, places limitations on the activities or functions of, or prohibits the activities of, a person; or
a cease-and-desist order entered by the Commission pursuant to section 9(f).
.
Investment advisers Act of 1940
Section 209(e) of the Investment Advisers Act of 1940 (15 U.S.C. 80b–9(e)) is amended—
in paragraph (1),
by inserting after the rules or regulations thereunder,
the
following: a Federal court injunction or a bar obtained or entered by
the Commission under this title,
; and
by amending paragraph (4) to read as follows:
Special provisions relating to a violation of an injunction or certain orders
In general
Each separate violation of an injunction or order described in subparagraph (B) shall be a separate offense, except that in the case of a violation through a continuing failure to comply with such injunction or order, each day of the failure to comply with the injunction or order shall be deemed a separate offense.
Injunctions and orders
Subparagraph (A) shall apply with respect to any action to enforce—
a Federal court injunction obtained pursuant to this title;
an order entered or obtained by the Commission pursuant to this title that bars, suspends, places limitations on the activities or functions of, or prohibits the activities of, a person; or
a cease-and-desist order entered by the Commission pursuant to section 203(k).
.
