Due Diligence
SEC Asks Congress to Allow it to Whack Lawbreakers with Higher Fines

SEC Asks Congress to Allow it to Whack Lawbreakers with Higher Fines

u_s_sec_logoOn the very day that the SEC caught heat for leniency in a recent settlement with Citigroup, SEC Chairman Mary Schapiro sent a letter to the Senate requesting higher limits on the fines it can impose on firms it regulates.

In the letter, dated Nov. 28 and addressed to Jack Reed, Chairman of the Senate Subcommittee on Banking, Housing and Urban Affairs, Schapiro noted that SEC faces certain statutory limitations on the fines it can currently levy. There are two methods possible for calculating fines. One is per violation, and Schapiro proposes raising the per violation caps on fines the SEC can levy from $150,000 per violation for individuals and $725,000 per violation for entities to $1 million per violation for individuals and $10 million per violation for entities.

The other method of calculation—three times the “gross amount of pecuniary gain”—is currently only available only in the most serious cases, and the SEC requests that this method of calculation be available in all cases. In addition, Schapiro requests that the SEC be allowed to calculate penalties for the most serious cases based on investor losses, as well.

Finally, the SEC asks that it be allowed to assess higher penalties on recidivists—firms like Citigroup that despite settlement terms that require them to promise not to violate the same regulations in the future, continue to do so.

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