A bipartisan bill was introduced in the Senate that would significantly increase the monetary amounts that the SEC can seek in cases involving tier three penalties and expand its authority to seek the increased penalties in administrative proceedings. Tier three penalties are available in cases involving fraud or reckless disregard of a regulatory requirement that results in substantial losses or creates a significant risk of substantial losses. The bill, entitled the Stronger Enforcement of Civil Penalties Act, would increase the cap for violations by individuals from the current amount of $150,000 per violation to $1 million per violation. The cap for violations by entities would be increased from the current amount of $725,000 per violation to $10 million per violation. Additionally, the bill would triple the amount of monetary fines the SEC can seek in tier three penalty cases where the penalties are tied to the defendant’s illegal profits. Other provisions in the bill provide the SEC with the power to impose greater sanctions in fraud cases and increased sanctions for “repeat offenders.” Finally, the proposed legislation would allow the SEC to seek the increased fines in administrative proceedings, a significant expansion of the SEC’s current enforcement authority.
The Stronger Enforcement of Civil Penalties Act is being recommended by the SEC and, due to its bipartisan support in Congress, has a good chance to be enacted into law. This bill would significantly increase the SEC’s power and give the SEC even more of an upper hand in settlement negotiations.