Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Section 21B -- Civil Remedies In Administrative Proceedings

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1. Commission authority to assess money penalties
   
   In any proceeding instituted pursuant to sections 15(b)(4), 15(b)(6), 15D, 15B, 15C, or 17A against any person, the Commission or the appropriate regulatory agency may impose a civil penalty if it finds, on the record after notice and opportunity for hearing, that such person--
   
   
   1. has willfully violated any provision of the Securities Act of 1933, the Investment Company Act of 1940, the Investment Advisers Act of 1940, or this title, or the rules or regulations thereunder, or the rules of the Municipal Securities Rulemaking Board;
      
      
   2. has willfully aided, abetted, counseled, commanded, induced, or procured such a violation by any other person;
      
      
   3. has willfully made or caused to be made in any application for registration or report required to be filed with the Commission or with any other appropriate regulatory agency under this title, or in any proceeding before the Commission with respect to registration, any statement which was, at the time and in the light of the circumstances under which it was made, false or misleading with respect to any material fact, or has omitted to state in any such application or report any material fact which is required to be stated therein; or
      
      
   4. has failed reasonably to supervise, within the meaning of section 15(b)(4)(E), with a view to preventing violations of the provisions of such statutes, rules and regulations, another person who commits such a violation, if such other person is subject to his supervision;
      
      
   and that such penalty is in the public interest.
   
   
2. Maximum amount of penalty
   
   
   1. First tier
      
      The maximum amount of penalty for each act or omission described in subsection (a) of this section shall be $5,000 for a natural person or $50,000 for any other person.
      
      
   2. Second tier
      
      Notwithstanding paragraph (1), the maximum amount of penalty for each such act or omission shall be $50,000 for a natural person or $250,000 for any other person if the act or omission described in subsection (a) of this section involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement.
      
      
   3. Third tier
      
      Notwithstanding paragraphs (1) and (2), the maximum amount of penalty for each such act or omission shall be $100,000 for a natural person or $500,000 for any other person if--
      
      
      1. the act or omission described in subsection (a) of this section involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and
         
         
      2. 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.
         
         
3. Determination of public interest
   
   In considering under this section whether a penalty is in the public interest, the Commission or the appropriate regulatory agency may consider--
   
   
   1. whether the act or omission for which such penalty is assessed involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement;
      
      
   2. the harm to other persons resulting either directly or indirectly from such act or omission;
      
      
   3. the extent to which any person was unjustly enriched, taking into account any restitution made to persons injured by such behavior;
      
      
   4. whether such person previously has been found by the Commission, another appropriate regulatory agency, or a self-regulatory organization to have violated the Federal securities laws, State securities laws, or the rules of a self-regulatory organization, has been enjoined by a court of competent jurisdiction from violations of such laws or rules, or has been convicted by a court of competent jurisdiction of violations of such laws or of any felony or misdemeanor described in section 15(b)(4)(B);
      
      
   5. the need to deter such person and other persons from committing such acts or omissions; and
      
      
   6. such other matters as justice may require.
      
      
4. Evidence concerning ability to pay
   
   In any proceeding in which the Commission or the appropriate regulatory agency may impose a penalty under this section, a respondent may present evidence of the respondent's ability to pay such penalty. The Commission or the appropriate regulatory agency may, in its discretion, consider such evidence in determining whether such penalty is in the public interest. Such evidence may relate to the extent of such person's ability to continue in business and the collectability of a penalty, taking into account any other claims of the United States or third parties upon such person's assets and the amount of such person's assets.
   
   
5. Authority to enter order requiring accounting and disgorgement
   
   In any proceeding in which the Commission or the appropriate regulatory agency may impose a penalty under this section, the Commission or the appropriate regulatory agency may enter an order requiring accounting and disgorgement, including reasonable interest. The Commission is authorized to adopt rules, regulations, and orders concerning payments to investors, rates of interest, periods of accrual, and such other matters as it deems appropriate to implement this subsection.
   
   

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