A bipartisan bill introduced in the US Senate wants to let the US Securities and Exchange Commission order violators of securities laws to pay much higher sanctions. If turned into law, the legislation would allow the regulator impose up to $1M as a penalty on individuals for every violation of the most serious offenses. The per penalty violation maximum for financial firms would be raised to $10M.
Currently, individuals cannot be ordered to pay a more than $181,071 penalty and the maximum for firms is $905,353. The SEC would have the option of tripling the cap on the maximum for repeat offenders who have been held civilly or criminally liable for securities fraud within the last five years.
At the moment, the SEC can calculate penalties that are the equivalent of the gross amount that were the ill-gotten gains only if the case is heard in federal court. The regulator cannot do so if it deals with the case administratively. The bipartisan bill would allow the regulator to assess such penalties in-house.
The authors of the bill are Senators Chuck Grassley (R-IA), Jack Reed (D-RI), Hedi Heitkamp (D-ND) and Patrick Leahy (D-Vt.). In a joint news release about the legislation, the lawmakers said they wanted to enhance the regulator’s ability to crack down on offenders who violate securities laws. Their bill is called the Stronger Enforcement of Civil Penalties Act of 2017. It would grant a direct correlation between the degree of harm and investor losses to the size of the penalty.
Meantime, according to InvestmentNews, at The Securities Industry and Financial Markets Association in San Diego last week, brokers commiserated at what they already believe is “regulatory overlap” and “duplication” in both “enforcement and rulemaking,” including cases in which both the Financial Industry Regulatory Authority and the SEC (and in some cases state regulators also) end up imposing fines over the same matter. InvestmentNews cited a number of examples, including Scottrade’s $2.5M settlement over trading data accuracy in 2014. The firm settled with FINRA regarding data integrity for the same amount.
At Shepherd Smith Edwards and Kantas, LTD LLP, our securities fraud law firm represents investors in trying to recover their losses. You want to work with a broker fraud lawyer who can advocate on your behalf.