[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 183 Introduced in Senate (IS)]
108th CONGRESS
1st Session
S. 183
To address Securities and Exchange Commission authority to impose civil
money penalties in administrative proceedings for violations of
securities laws, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
January 16, 2003
Mr. Levin (for himself, Mr. Nelson of Florida, Mr. Corzine, and Mr.
Biden) introduced the following bill; which was read twice and referred
to the Committee on Banking, Housing, and Urban Affairs
_______________________________________________________________________
A BILL
To address Securities and Exchange Commission authority to impose civil
money penalties in administrative proceedings for violations of
securities laws, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``SEC Civil Enforcement Act''.
SEC. 2. SECURITIES CIVIL ENFORCEMENT PROVISIONS.
(a) Authority To Assess Civil Money Penalties.--
(1) Securities act of 1933.--Section 8A of the Securities
Act of 1933 (15 U.S.C. 77h-1) is amended by adding at the end
the following new subsection:
``(g) Authority of the Commission To Assess Money Penalty.--
``(1) In general.--In any cease-and-desist proceeding under
subsection (a), the Commission may impose a civil monetary
penalty if it finds, on the record after notice and opportunity
for hearing, that a person is violating, has violated, or is or
was a cause of the violation of, any provision of this title or
any rule or regulation thereunder, and that such penalty is in
the public interest.
``(2) Maximum amount of penalty.--
``(A) First tier.--The maximum amount of penalty
for each act or omission described in paragraph (1)
shall be $100,000 for a natural person or $250,000 for
any other person.
``(B) Second tier.--Notwithstanding subparagraph
(A), the maximum amount of penalty for such act or
omission described in paragraph (1) shall be $500,000
for a natural person or $1,000,000 for any other
person, if the act or omission involved fraud, deceit,
manipulation, or deliberate or reckless disregard of a
statutory or regulatory requirement.
``(C) Third tier.--Notwithstanding subparagraphs
(A) and (B), the maximum amount of penalty for each act
or omission described in paragraph (1) shall be
$1,000,000 for a natural person or $2,000,000 for any
other person, if--
``(i) the act or omission involved fraud,
deceit, manipulation, or deliberate or reckless
disregard of a statutory or regulatory
requirement; and
``(ii) 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) 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 ability of the
respondent to pay such penalty. The Commission or the
appropriate regulatory agency may, in its discretion, consider
such evidence in determining whether the penalty is in the
public interest. Such evidence may relate to the extent of the
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 the assets of that person
and the amount of the assets of that person.''.
(2) Securities exchange act of 1934.--Section 21B(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-2(a)) is
amended--
(A) in paragraph (4), by striking ``supervision;''
and all that follows through the end of the subsection
and inserting ``supervision.'';
(B) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D), respectively, and moving
the margins 2 ems to the right;
(C) by inserting ``that such penalty is in the
public interest and'' after ``hearing,'';
(D) by striking ``In any proceeding'' and inserting
the following:
``(1) In general.--In any proceeding''; and
(E) by adding at the end the following:
``(2) Other money penalties.--In any proceeding under
section 21C against any person, the Commission may impose a
civil monetary penalty if it finds, on the record after notice
and opportunity for hearing, that such person is violating, has
violated, or is or was a cause of the violation of, any
provision of this title or any rule or regulation thereunder,
and that such penalty is in the public interest.''.
(3) Investment company act of 1940.--Section 9(d)(1) of the
Investment Company Act of 1940 (15 U.S.C. 80a-9(d)(1)) is
amended--
(A) in subparagraph (C), by striking ``therein;''
and all that follows through the end of the paragraph
and inserting ``supervision.'';
(B) by redesignating subparagraphs (A) through (C)
as clauses (i) through (iii), respectively, and moving
the margins 2 ems to the right;
(C) by inserting ``that such penalty is in the
public interest and'' after ``hearing,'';
(D) by striking ``In any proceeding'' and inserting
the following:
``(A) In general.--In any proceeding''; and
(E) by adding at the end the following:
``(B) Other money penalties.--In any proceeding
under subsection (f) against any person, the Commission
may impose a civil monetary penalty if it finds, on the
record after notice and opportunity for hearing, that such person is
violating, has violated, or is or was a cause of the violation of, any
provision of this title or any rule or regulation thereunder, and that
such penalty is in the public interest.''.
(4) Investment advisers act of 1940.--Section 203(i)(1) of
the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(i)(1)) is
amended--
(A) in subparagraph (D), by striking
``supervision;'' and all that follows through the end
of the paragraph and inserting ``supervision.'';
(B) by redesignating subparagraphs (A) through (D)
as clauses (i) through (iv), respectively, and moving
the margins 2 ems to the right;
(C) by inserting ``that such penalty is in the
public interest and'' after ``hearing,'';
(D) by striking ``In any proceeding'' and inserting
the following:
``(A) In general.--In any proceeding''; and
(E) by adding at the end the following:
``(B) Other money penalties.--In any proceeding
under subsection (k) against any person, the Commission
may impose a civil monetary penalty if it finds, on the
record after notice and opportunity for hearing, that
such person is violating, has violated, or is or was a
cause of the violation of, any provision of this title
or any rule or regulation thereunder, and that such
penalty is in the public interest.''.
(b) Increased Maximum Civil Money Penalties.--
(1) Securities act of 1933.--Section 20(d)(2) of the
Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is amended--
(A) in subparagraph (A)(i)--
(i) by striking ``$5,000'' and inserting
``$100,000''; and
(ii) by striking ``$50,000'' and inserting
``$250,000'';
(B) in subparagraph (B)(i)--
(i) by striking ``$50,000'' and inserting
``$500,000''; and
(ii) by striking ``$250,000'' and inserting
``$1,000,000''; and
(C) in subparagraph (C)(i)--
(i) by striking ``$100,000'' and inserting
``$1,000,000''; and
(ii) by striking ``$500,000'' and inserting
``$2,000,000''.
(2) Securities exchange act of 1934.--
(A) Penalties.--Section 32 of the Securities
Exchange Act of 1934 (15 U.S.C. 78ff) is amended--
(i) in subsection (b), by striking ``$100''
and inserting ``$10,000''; and
(ii) in subsection (c)--
(I) in paragraph (1)(B), by
striking ``$10,000'' and inserting
``$500,000''; and
(II) in paragraph (2)(B), by
striking ``$10,000'' and inserting
``$500,000''.
(B) Insider trading.--Section 21A(a)(3) of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-1(a)(3))
is amended by striking ``$1,000,000'' and inserting
``$2,000,000''.
(C) Administrative proceedings.--Section 21B(b) of
the Securities Exchange Act of 1934 (15 U.S.C. 78u-
2(b)) is amended--
(i) in paragraph (1)--
(I) by striking ``$5,000'' and
inserting ``$100,000''; and
(II) by striking ``$50,000'' and
inserting ``$250,000'';
(ii) in paragraph (2)--
(I) by striking ``$50,000'' and
inserting ``$500,000''; and
(II) by striking ``$250,000'' and
inserting ``$1,000,000''; and
(iii) in paragraph (3)--
(I) by striking ``$100,000'' and
inserting ``$1,000,000''; and
(II) by striking ``$500,000'' and
inserting ``$2,000,000''.
(D) Civil actions.--Section 21(d)(3)(B) of the
Securities Exchange Act of 1934 (15 U.S.C.
78u(d)(3)(B)) is amended--
(i) in clause (i)--
(I) by striking ``$5,000'' and
inserting ``$100,000''; and
(II) by striking ``$50,000'' and
inserting ``$250,000'';
(ii) in clause (ii)--
(I) by striking ``$50,000'' and
inserting ``$500,000''; and
(II) by striking ``$250,000'' and
inserting ``$1,000,000''; and
(iii) in clause (iii)--
(I) by striking ``$100,000'' and
inserting ``$1,000,000''; and
(II) by striking ``$500,000'' and
inserting ``$2,000,000''.
(3) Investment company act of 1940.--
(A) Ineligibility.--Section 9(d)(2) of the
Investment Company Act of 1940 (15 U.S.C. 80a-9(d)(2))
is amended--
(i) in subparagraph (A)--
(I) by striking ``$5,000'' and
inserting ``$100,000''; and
(II) by striking ``$50,000'' and
inserting ``$250,000'';
(ii) in subparagraph (B)--
(I) by striking ``$50,000'' and
inserting ``$500,000''; and
(II) by striking ``$250,000'' and
inserting ``$1,000,000''; and
(iii) in subparagraph (C)--
(I) by striking ``$100,000'' and
inserting ``$1,000,000''; and
(II) by striking ``$500,000'' and
inserting ``$2,000,000''.
(B) Enforcement of investment company act.--Section
42(e)(2) of the Investment Company Act of 1940 (15
U.S.C. 80a-41(e)(2)) is amended--
(i) in subparagraph (A)--
(I) by striking ``$5,000'' and
inserting ``$100,000''; and
(II) by striking ``$50,000'' and
inserting ``$250,000'';
(ii) in subparagraph (B)--
(I) by striking ``$50,000'' and
inserting ``$500,000''; and
(II) by striking ``$250,000'' and
inserting ``$1,000,000''; and
(iii) in subparagraph (C)--
(I) by striking ``$100,000'' and
inserting ``$1,000,000''; and
(II) by striking ``$500,000'' and
inserting ``$2,000,000''.
(4) Investment advisers act of 1940.--
(A) Registration.--Section 203(i)(2) of the
Investment advisers Act of 1940 (15 U.S.C. 80b-3(i)(2))
is amended--
(i) in subparagraph (A)--
(I) by striking ``$5,000'' and
inserting ``$100,000''; and
(II) by striking ``$50,000'' and
inserting ``$250,000'';
(ii) in subparagraph (B)--
(I) by striking ``$50,000'' and
inserting ``$500,000''; and
(II) by striking ``$250,000'' and
inserting ``$1,000,000''; and
(iii) in subparagraph (C)--
(I) by striking ``$100,000'' and
inserting ``$1,000,000''; and
(II) by striking ``$500,000'' and
inserting ``$2,000,000''.
(B) Enforcement of investment advisers act.--
Section 209(e)(2) of the Investment advisers Act of
1940 (15 U.S.C. 80b-9(e)(2)) is amended--
(i) in subparagraph (A)--
(I) by striking ``$5,000'' and
inserting ``$100,000''; and
(II) by striking ``$50,000'' and
inserting ``$250,000'';
(ii) in subparagraph (B)--
(I) by striking ``$50,000'' and
inserting ``$500,000''; and
(II) by striking ``$250,000'' and
inserting ``$1,000,000''; and
(iii) in subparagraph (C)--
(I) by striking ``$100,000'' and
inserting ``$1,000,000''; and
(II) by striking ``$500,000'' and
inserting ``$2,000,000''.
(c) Authority To Obtain Financial Records.--Section 21(h) of the
Securities Exchange Act of 1934 (15 U.S.C. 78u(h)) is amended--
(1) by striking paragraphs (2) through (8);
(2) in paragraph (9), by striking ``(9)(A)'' and all that
follows through ``(B) The'' and inserting ``(3) The'';
(3) by inserting after paragraph (1), the following:
``(2) Access to financial records.--
``(A) In general.--Notwithstanding section 1105 or
1107 of the Right to Financial Privacy Act of 1978, the
Commission may obtain access to and copies of, or the
information contained in, financial records of any
person held by a financial institution, including the
financial records of a customer, without notice to that
person, when it acts pursuant to a subpoena authorized
by a formal order of investigation of the Commission
and issued under the securities laws or pursuant to an
administrative or judicial subpoena issued in a
proceeding or action to enforce the securities laws.
``(B) Nondisclosure of requests.--If the Commission
so directs in its subpoena, no financial institution,
or officer, director, partner, employee, shareholder,
representative or agent of such financial institution,
shall, directly or indirectly, disclose that records
have been requested or provided in accordance with
subparagraph (A), if the Commission finds reason to
believe that such disclosure may--
``(i) result in the transfer of assets or
records outside the territorial limits of the
United States;
``(ii) result in improper conversion of
investor assets;
``(iii) impede the ability of the
Commission to identify, trace, or freeze funds
involved in any securities transaction;
``(iv) endanger the life or physical safety
of an individual;
``(v) result in flight from prosecution;
``(vi) result in destruction of or
tampering with evidence;
``(vii) result in intimidation of potential
witnesses; or
``(viii) otherwise seriously jeopardize an
investigation or unduly delay a trial.
``(C) Transfer of records to government
authorities.--The Commission may transfer financial
records or the information contained therein to any
government authority, if the Commission proceeds as a
transferring agency in accordance with section 1112 of
the Right to Financial Privacy Act of 1978 (12 U.S.C.
3412), except that a customer notice shall not be
required under subsection (b) or (c) of that section
1112, if the Commission determines that there is reason
to believe that such notification may result in or lead
to any of the factors identified under clauses (i)
through (viii) of subparagraph (B) of this
paragraph.'';
(4) by striking paragraph (10); and
(5) by redesignating paragraphs (11), (12), and (13) as
paragraphs (4), (5), and (6), respectively.
<all>