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SEC Asks Congress for the Authority to Impose Higher Penalties

In a recent letter to the Chairman and Ranking Member of the Senate Banking Subcommittee on Securities, Insurance, and Investment, SEC Chairman Mary Schapiro proposed statutory changes that would allow the SEC to levy higher fines on those violating the securities laws.  Her proposal included changes to two statutory methods for calculating fines:

  1. The first calculation method currently caps fines at up to $150,000 per violation and up to $725,000 per entity.  Chairman Schapiro proposed increasing these caps to $1 million and $10 million, respectively.
  2. The second calculation method allows the SEC to impose a financial penalty in the amount of the defendant's ill-gotten profits.  Chairman Schapiro proposed that Congress change this method to allow the SEC to impose a penalty that is three times the amount of ill-gotten gains.  She also proposed a new calculation method for penalties that would be based on the amount of losses suffered by investors (rather than gains received by wrongdoer's). 

Additionally, Chairman Schapiro asked Congress to authorize higher penalties for those individuals or entities that have violated the securities laws multiple times).