Senators Introduce Bipartisan SEC Penalties Act to Crack Down on Wall Street Fraud
A group of bipartisan senators introduced a bill intended to protect investors and strengthen oversight and accountability of Wall Street by increasing civil monetary penalties levied by the Securities and Exchange Commission.
Senators Jack Reed (D-RI), Chuck Grassley (R-IA), Patrick Leahy (D-VT), and Heidi Heitkamp (D-ND) introduced The Stronger Enforcement of Civil Penalties Act (SEC Penalties Act) of 2017 which would update and strengthen the SEC’s civil penalties statute by increasing the statutory limits on civil monetary penalties, directly linking the size of these penalties to the scope of harm and associated investor losses, and raising the financial stakes for repeat securities law violators.
The senators said the goal of the legislation is to create meaningful penalties to serve as an effective deterrent to crack down on fraud.
Under existing law, the SEC is constrained to penalizing violators in some cases to a maximum of $181,071 per offense and institutions to $905,353. 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.
Specifically, 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.
It would also triple the penalty cap for recidivists who have been held criminally or civilly liable for securities fraud within the preceding five years. The agency would be able to assess these types of penalties in-house, and not just in federal court.
“If a fine is just decimal dust for a Wall Street firm, that’s not a deterrent,” Senator Grassley said. “It’s just the cost of doing business. A penalty should mean something, and it should get the recidivists’ attention. I welcome the increased penalties for repeat offenders in this bill. That step should help change the dynamic of business as usual. The SEC should have strong penalties in place to protect the securities markets from bad actors.”
Senator Leahy said: “Congress has worked in recent years to rein in Wall Street abuses and recklessness. But it is past time for the penalties for violating our laws to actually deter bad behavior, not just reflect the damage that results. Americans on Main Street have suffered, while Wall Street has flourished. With the SEC Penalties Act, we are telling Wall Street that it will be held accountable. Getting caught breaking the law should never be a mere cost of doing business.”
The bill must be considered by the Banking, Housing, and Urban Affairs Committee before it can be voted on by the Senate.
