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U.S. Code as of:
01/19/04
Section 78u-2. Civil remedies in administrative proceedings
(a) Commission authority to assess money penalties
In any proceeding instituted pursuant to sections 78o(b)(4),
78o(b)(6), 78o-6, 78o-4, 78o-5, or 78q-1 of this title against any
person, the Commission or the appropriate regulatory agency may
impose a civil penalty if it finds, on the record after notice and
opportunity for hearing, that such person -
(1) has willfully violated any provision of the Securities Act
of 1933 [15 U.S.C. 77a et seq.], the Investment Company Act of
1940 [15 U.S.C. 80a-1 et seq.], the Investment Advisers Act of
1940 [15 U.S.C. 80b-1 et seq.], or this chapter, or the rules or
regulations thereunder, or the rules of the Municipal Securities
Rulemaking Board;
(2) has willfully aided, abetted, counseled, commanded,
induced, or procured such a violation by any other person;
(3) has willfully made or caused to be made in any application
for registration or report required to be filed with the
Commission or with any other appropriate regulatory agency under
this chapter, or in any proceeding before the Commission with
respect to registration, any statement which was, at the time and
in the light of the circumstances under which it was made, false
or misleading with respect to any material fact, or has omitted
to state in any such application or report any material fact
which is required to be stated therein; or
(4) has failed reasonably to supervise, within the meaning of
section 78o(b)(4)(E) of this title, with a view to preventing
violations of the provisions of such statutes, rules and
regulations, another person who commits such a violation, if such
other person is subject to his supervision;
and that such penalty is in the public interest.
(b) Maximum amount of penalty
(1) First tier
The maximum amount of penalty for each act or omission
described in subsection (a) of this section shall be $5,000 for a
natural person or $50,000 for any other person.
(2) Second tier
Notwithstanding paragraph (1), the maximum amount of penalty
for each such act or omission shall be $50,000 for a natural
person or $250,000 for any other person if the act or omission
described in subsection (a) of this section involved fraud,
deceit, manipulation, or deliberate or reckless disregard of a
regulatory requirement.
(3) Third tier
Notwithstanding paragraphs (1) and (2), the maximum amount of
penalty for each such act or omission shall be $100,000 for a
natural person or $500,000 for any other person if -
(A) the act or omission described in subsection (a) of this
section involved fraud, deceit, manipulation, or deliberate or
reckless disregard of a regulatory requirement; and
(B) 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.
(c) Determination of public interest
In considering under this section whether a penalty is in the
public interest, the Commission or the appropriate regulatory
agency may consider -
(1) whether the act or omission for which such penalty is
assessed involved fraud, deceit, manipulation, or deliberate or
reckless disregard of a regulatory requirement;
(2) the harm to other persons resulting either directly or
indirectly from such act or omission;
(3) the extent to which any person was unjustly enriched,
taking into account any restitution made to persons injured by
such behavior;
(4) whether such person previously has been found by the
Commission, another appropriate regulatory agency, or a
self-regulatory organization to have violated the Federal
securities laws, State securities laws, or the rules of a
self-regulatory organization, has been enjoined by a court of
competent jurisdiction from violations of such laws or rules, or
has been convicted by a court of competent jurisdiction of
violations of such laws or of any felony or misdemeanor described
in section 78o(b)(4)(B) of this title;
(5) the need to deter such person and other persons from
committing such acts or omissions; and
(6) such other matters as justice may require.
(d) 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 respondent's ability to pay
such penalty. The Commission or the appropriate regulatory agency
may, in its discretion, consider such evidence in determining
whether such penalty is in the public interest. Such evidence may
relate to the extent of such 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 such
person's assets and the amount of such person's assets.
(e) Authority to enter order requiring accounting and disgorgement
In any proceeding in which the Commission or the appropriate
regulatory agency may impose a penalty under this section, the
Commission or the appropriate regulatory agency may enter an order
requiring accounting and disgorgement, including reasonable
interest. The Commission is authorized to adopt rules, regulations,
and orders concerning payments to investors, rates of interest,
periods of accrual, and such other matters as it deems appropriate
to implement this subsection.
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