I n the case of SEC v. Steven M. Bolla, et al., the U.S. District Court for the District of Columbia recently held that the SEC is not authorized to seek monetary penalties against aiders and abettors of violations of the Investment Advisers Act in an action brought in federal court. The case centered on Section 209(e) of the Advisers Act, which provides that the SEC “may bring an action in a United States district court to seek … a civil penalty to be paid by the person who committed such violation.” The court read this language as authorizing monetary penalties against primary violators, but not aiders and abettors.
According to the court, this interpretation is supported by the fact that Congress gave the SEC the explicit authority to seek penalties against aiders and abettors under other securities laws, such as Section 203(i) of the Advisers Act, which expressly authorizes the SEC to seek monetary penalties from aiders and abettors in administrative proceedings. The court stated that it also could not overlook the views of the U.S. Supreme Court, which has stated that “Congress knew how to impose aiding and abetting liability when it chose to do so. If … Congress intended to impose aiding and abetting liability, we presume it would have used the words ‘aid’ and ‘abet’ in the statutory text.” In addition, the court noted that the SEC could not point to any precedent actually analyzing the availability of monetary penalties against aiders and abettors in judicial proceedings.
Notwithstanding the court’s holding, the SEC still has authority to pursue monetary penalties against aiders and abettors of Advisers Act violations through administrative proceedings. The SEC also has authority to pursue injunctive relief against aiders and abettors of Advisers Act violations through judicial proceedings.