What This Bill Does
This bill increases the money penalties that courts and federal agencies can impose when people or companies break securities laws. Securities laws are rules that protect people who invest in stocks, bonds and similar financial products. The bill creates higher penalty amounts for more serious violations and adds extra penalties for people who break the rules again within 5 years.
Who It Affects
- People and companies that violate federal securities laws
- The Securities and Exchange Commission (the agency that enforces securities laws)
- Federal courts that handle securities law cases
- Investment companies and investment advisers
- Victims of securities fraud (financial crimes involving deception in investments)
Key Provisions
- The bill increases basic money penalties for first-time violations under four separate securities laws, with some penalties rising from $5,000 to $10,000 and others from $250,000 to $500,000 (Sec. 2)
- For serious violations involving fraud, deception, manipulation or rule-breaking that caused substantial harm, penalties can reach up to $1,000,000 for individuals or $10,000,000 for companies (Sec. 2)
- People or companies convicted of securities fraud within the previous 5 years face penalties up to 3 times higher than normal (Sec. 3)
- Violating court injunctions or agency orders becomes treated as a separate offense for each violation, or for each day of continuing violation (Sec. 4)
What Changes
If this bill becomes law, financial penalties for breaking securities laws will increase significantly. First-time violators will face higher base penalties. People and companies with previous fraud convictions within 5 years will face much steeper penalties. Violating court orders or agency bans will result in more penalties since each day of non-compliance counts as a separate violation.
Important Definitions
- Fraud: intentional deception or misrepresentation (Sec. 2)
- Manipulation: deliberate interference with market prices (Sec. 2)
- Pecuniary gain: money or financial benefit earned dishonestly (Sec. 2)
- Cease-and-desist order: an order requiring someone to stop illegal activity (Sec. 3)
Effective Date
Not specified in bill text
II
118TH CONGRESS
1ST SESSION
S. 837
To enhance civil penalties under the Federal securities laws, and for other
purposes.
IN THE SENATE OF THE UNITED STATES
MARCH 16, 2023
Mr. REED (for himself and Mr. GRASSLEY) introduced the following bill;
which was read twice and referred to the Committee on Banking, Hous-
ing, and Urban Affairs
A BILL
To enhance civil penalties under the Federal securities laws,
and for other purposes.
Be it enacted by the Senate and House of Representa-
1
tives of the United States of America in Congress assembled,
2
SECTION 1. SHORT TITLE.
3
This Act may be cited as the ‘‘Stronger Enforcement
4
of Civil Penalties Act of 2023’’.
5
SEC. 2. UPDATED CIVIL MONEY PENALTIES FOR SECURI-
6
TIES LAWS VIOLATIONS.
7
(a) SECURITIES ACT OF 1933.—
8
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•S 837 IS
(1) MONEY PENALTIES IN ADMINISTRATIVE AC-
1
TIONS.—Section 8A(g)(2) of the Securities Act of
2
1933 (15 U.S.C. 77h–1(g)(2)) is amended—
3
(A) in subparagraph (A)—
4
(i) by striking ‘‘$7,500’’ and inserting
5
‘‘$10,000’’; and
6
(ii) by striking ‘‘$75,000’’ and insert-
7
ing ‘‘$100,000’’;
8
(B) in subparagraph (B)—
9
(i) by striking ‘‘$75,000’’ and insert-
10
ing ‘‘$100,000’’; and
11
(ii) by striking ‘‘$375,000’’ and in-
12
serting ‘‘$500,000’’; and
13
(C) by striking subparagraph (C) and in-
14
serting the following:
15
‘‘(C) THIRD TIER.—
16
‘‘(i) IN
GENERAL.—Notwithstanding
17
subparagraphs (A) and (B), for a third
18
tier act or omission, the amount of penalty
19
for each such act or omission shall not ex-
20
ceed the greater of—
21
‘‘(I) $1,000,000 for a natural
22
person or $10,000,000 for any other
23
person;
24
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•S 837 IS
‘‘(II) 3 times the gross amount of
1
pecuniary gain to the person who
2
committed the act or omission; or
3
‘‘(III) the amount of losses in-
4
curred by victims as a result of the
5
act or omission.
6
‘‘(ii) THIRD TIER ACT OR OMISSION.—
7
For the purposes of this subparagraph, the
8
term ‘third tier act or omission’ means an
9
act or omission described in paragraph (1)
10
that—
11
‘‘(I) involved fraud, deceit, ma-
12
nipulation, or deliberate or reckless
13
disregard of a regulatory requirement;
14
and
15
‘‘(II) directly or indirectly—
16
‘‘(aa) resulted in substantial
17
losses to other persons;
18
‘‘(bb) created a significant
19
risk of substantial losses to other
20
persons; or
21
‘‘(cc) resulted in substantial
22
pecuniary gain to the person who
23
committed the act or omission.’’.
24
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•S 837 IS
(2) MONEY
PENALTIES
IN
CIVIL
ACTIONS.—
1
Section 20(d)(2) of the Securities Act of 1933 (15
2
U.S.C. 77t(d)(2)) is amended—
3
(A) in subparagraph (A)—
4
(i) by striking ‘‘$5,000’’ and inserting
5
‘‘$10,000’’; and
6
(ii) by striking ‘‘$50,000’’ and insert-
7
ing ‘‘$100,000’’;
8
(B) in subparagraph (B)—
9
(i) by striking ‘‘$50,000’’ and insert-
10
ing ‘‘$100,000’’; and
11
(ii) by striking ‘‘$250,000’’ and in-
12
serting ‘‘$500,000’’; and
13
(C) by striking subparagraph (C) and in-
14
serting the following:
15
‘‘(C) THIRD TIER.—
16
‘‘(i) IN
GENERAL.—Notwithstanding
17
subparagraphs (A) and (B), for a third
18
tier violation, the amount of penalty for
19
each such violation shall not exceed the
20
greater of—
21
‘‘(I) $1,000,000 for a natural
22
person or $10,000,000 for any other
23
person;
24
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•S 837 IS
‘‘(II) 3 times the gross amount of
1
pecuniary gain to the person who
2
committed the violation; or
3
‘‘(III) the amount of losses in-
4
curred by victims as a result of the
5
violation.
6
‘‘(ii) THIRD
TIER
VIOLATION.—For
7
the purposes of this subparagraph, the
8
term ‘third tier violation’ means a violation
9
described in paragraph (1) that—
10
‘‘(I) involved fraud, deceit, ma-
11
nipulation, or deliberate or reckless
12
disregard of a regulatory requirement;
13
and
14
‘‘(II) directly or indirectly—
15
‘‘(aa) resulted in substantial
16
losses to other persons;
17
‘‘(bb) created a significant
18
risk of substantial losses to other
19
persons; or
20
‘‘(cc) resulted in substantial
21
pecuniary gain to the person who
22
committed the violation.’’.
23
(b) SECURITIES EXCHANGE ACT OF 1934.—
24
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6
•S 837 IS
(1) MONEY
PENALTIES
IN
CIVIL
ACTIONS.—
1
Section 21(d)(3)(B) of the Securities Exchange Act
2
of 1934 (15 U.S.C. 78u(d)(3)(B)) is amended—
3
(A) in clause (i)—
4
(i) by striking ‘‘$5,000’’ and inserting
5
‘‘$10,000’’; and
6
(ii) by striking ‘‘$50,000’’ and insert-
7
ing ‘‘$100,000’’;
8
(B) in clause (ii)—
9
(i) by striking ‘‘$50,000’’ and insert-
10
ing ‘‘$100,000’’; and
11
(ii) by striking ‘‘$250,000’’ and in-
12
serting ‘‘$500,000’’; and
13
(C) by striking clause (iii) and inserting
14
the following:
15
‘‘(iii) THIRD TIER.—
16
‘‘(I)
IN
GENERAL.—Notwith-
17
standing clauses (i) and (ii), for a
18
third tier violation, the amount of
19
penalty for each such violation shall
20
not exceed the greater of—
21
‘‘(aa) $1,000,000 for a nat-
22
ural person or $10,000,000 for
23
any other person;
24
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•S 837 IS
‘‘(bb) 3 times the gross
1
amount of pecuniary gain to the
2
person who committed the viola-
3
tion; or
4
‘‘(cc) the amount of losses
5
incurred by victims as a result of
6
the violation.
7
‘‘(II) THIRD TIER VIOLATION.—
8
For the purposes of this clause, the
9
term ‘third tier violation’ means a vio-
10
lation described in subparagraph (A)
11
that—
12
‘‘(aa) involved fraud, deceit,
13
manipulation, or deliberate or
14
reckless disregard of a regulatory
15
requirement; and
16
‘‘(bb) directly or indirectly—
17
‘‘(AA) resulted in sub-
18
stantial losses to other per-
19
sons;
20
‘‘(BB) created a signifi-
21
cant
risk
of
substantial
22
losses to other persons; or
23
‘‘(CC) resulted in sub-
24
stantial pecuniary gain to
25
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•S 837 IS
the person who committed
1
the violation.’’.
2
(2) MONEY PENALTIES IN ADMINISTRATIVE AC-
3
TIONS.—Section 21B(b) of the Securities Exchange
4
Act of 1934 (15 U.S.C. 78u–2(b)) is amended—
5
(A) in paragraph (1)—
6
(i) by striking ‘‘$5,000’’ and inserting
7
‘‘$10,000’’; and
8
(ii) by striking ‘‘$50,000’’ and insert-
9
ing ‘‘$100,000’’;
10
(B) in paragraph (2)—
11
(i) by striking ‘‘$50,000’’ and insert-
12
ing ‘‘$100,000’’; and
13
(ii) by striking ‘‘$250,000’’ and in-
14
serting ‘‘$500,000’’; and
15
(C) by striking paragraph (3) and insert-
16
ing the following:
17
‘‘(3) THIRD TIER.—
18
‘‘(A)
IN
GENERAL.—Notwithstanding
19
paragraphs (1) and (2), for a third tier act or
20
omission, the amount of penalty for each such
21
act or omission shall not exceed the greater
22
of—
23
‘‘(i) $1,000,000 for a natural person
24
or $10,000,000 for any other person;
25
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•S 837 IS
‘‘(ii) 3 times the gross amount of pe-
1
cuniary gain to the person who committed
2
the act or omission; or
3
‘‘(iii) the amount of losses incurred by
4
victims as a result of the act or omission.
5
‘‘(B) THIRD TIER ACT OR OMISSION.—For
6
the purposes of this paragraph, the term ‘third
7
tier act or omission’ means an act or omission
8
described in paragraph (1) that—
9
‘‘(i) involved fraud, deceit, manipula-
10
tion, or deliberate or reckless disregard of
11
a regulatory requirement; and
12
‘‘(ii) directly or indirectly—
13
‘‘(I) resulted in substantial losses
14
to other persons;
15
‘‘(II) created a significant risk of
16
substantial losses to other persons; or
17
‘‘(III) resulted in substantial pe-
18
cuniary gain to the person who com-
19
mitted the act or omission.’’.
20
(c) INVESTMENT COMPANY ACT OF 1940.—
21
(1) MONEY PENALTIES IN ADMINISTRATIVE AC-
22
TIONS.—Section 9(d)(2) of the Investment Company
23
Act of 1940 (15 U.S.C. 80a–9(d)(2)) is amended—
24
(A) in subparagraph (A)—
25
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10
•S 837 IS
(i) by striking ‘‘$5,000’’ and inserting
1
‘‘$10,000’’; and
2
(ii) by striking ‘‘$50,000’’ and insert-
3
ing ‘‘$100,000’’;
4
(B) in subparagraph (B)—
5
(i) by striking ‘‘$50,000’’ and insert-
6
ing ‘‘$100,000’’; and
7
(ii) by striking ‘‘$250,000’’ and in-
8
serting ‘‘$500,000’’; and
9
(C) by striking subparagraph (C) and in-
10
serting the following:
11
‘‘(C) THIRD TIER.—
12
‘‘(i) IN
GENERAL.—Notwithstanding
13
subparagraphs (A) and (B), for a third
14
tier act or omission, the amount of penalty
15
for each such act or omission shall not ex-
16
ceed the greater of—
17
‘‘(I) $1,000,000 for a natural
18
person or $10,000,000 for any other
19
person;
20
‘‘(II) 3 times the gross amount of
21
pecuniary gain to the person who
22
committed the act or omission; or
23
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•S 837 IS
‘‘(III) the amount of losses in-
1
curred by victims as a result of the
2
act or omission.
3
‘‘(ii) THIRD TIER ACT OR OMISSION.—
4
For the purposes of this subparagraph, the
5
term ‘third tier act or omission’ means an
6
act or omission described in paragraph (1)
7
that—
8
‘‘(I) involved fraud, deceit, ma-
9
nipulation, or deliberate or reckless
10
disregard of a regulatory requirement;
11
and
12
‘‘(II) directly or indirectly—
13
‘‘(aa) resulted in substantial
14
losses to other persons;
15
‘‘(bb) created a significant
16
risk of substantial losses to other
17
persons; or
18
‘‘(cc) resulted in substantial
19
pecuniary gain to the person who
20
committed the act or omission.’’.
21
(2) MONEY
PENALTIES
IN
CIVIL
ACTIONS.—
22
Section 42(e)(2) of the Investment Company Act of
23
1940 (15 U.S.C. 80a–41(e)(2)) is amended—
24
(A) in subparagraph (A)—
25
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12
•S 837 IS
(i) by striking ‘‘$5,000’’ and inserting
1
‘‘$10,000’’; and
2
(ii) by striking ‘‘$50,000’’ and insert-
3
ing ‘‘$100,000’’;
4
(B) in subparagraph (B)—
5
(i) by striking ‘‘$50,000’’ and insert-
6
ing ‘‘$100,000’’; and
7
(ii) by striking ‘‘$250,000’’ and in-
8
serting ‘‘$500,000’’; and
9
(C) by striking subparagraph (C) and in-
10
serting the following:
11
‘‘(C) THIRD TIER.—
12
‘‘(i) IN
GENERAL.—Notwithstanding
13
subparagraphs (A) and (B), for a third
14
tier violation, the amount of penalty for
15
each such violation shall not exceed the
16
greater of—
17
‘‘(I) $1,000,000 for a natural
18
person or $10,000,000 for any other
19
person;
20
‘‘(II) 3 times the gross amount of
21
pecuniary gain to the person who
22
committed the violation; or
23
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13
•S 837 IS
‘‘(III) the amount of losses in-
1
curred by victims as a result of the
2
violation.
3
‘‘(ii) THIRD
TIER
VIOLATION.—For
4
the purposes of this subparagraph, the
5
term ‘third tier violation’ means a violation
6
described in paragraph (1) that—
7
‘‘(I) involved fraud, deceit, ma-
8
nipulation, or deliberate or reckless
9
disregard of a regulatory requirement;
10
and
11
‘‘(II) directly or indirectly—
12
‘‘(aa) resulted in substantial
13
losses to other persons;
14
‘‘(bb) created a significant
15
risk of substantial losses to other
16
persons; or
17
‘‘(cc) resulted in substantial
18
pecuniary gain to the person who
19
committed the violation.’’.
20
(d) INVESTMENT ADVISERS ACT OF 1940.—
21
(1) MONEY PENALTIES IN ADMINISTRATIVE AC-
22
TIONS.—Section 203(i)(2) of the Investment Advis-
23
ers Act of 1940 (15 U.S.C. 80b–3(i)(2)) is amend-
24
ed—
25
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•S 837 IS
(A) in subparagraph (A)—
1
(i) by striking ‘‘$5,000’’ and inserting
2
‘‘$10,000’’; and
3
(ii) by striking ‘‘$50,000’’ and insert-
4
ing ‘‘$100,000’’;
5
(B) in subparagraph (B)—
6
(i) by striking ‘‘$50,000’’ and insert-
7
ing ‘‘$100,000’’; and
8
(ii) by striking ‘‘$250,000’’ and in-
9
serting ‘‘$500,000’’; and
10
(C) by striking subparagraph (C) and in-
11
serting the following:
12
‘‘(C) THIRD TIER.—
13
‘‘(i) IN
GENERAL.—Notwithstanding
14
subparagraphs (A) and (B), for a third
15
tier act or omission, the amount of penalty
16
for each such act or omission shall not ex-
17
ceed the greater of—
18
‘‘(I) $1,000,000 for a natural
19
person or $10,000,000 for any other
20
person;
21
‘‘(II) 3 times the gross amount of
22
pecuniary gain to the person who
23
committed the act or omission; or
24
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•S 837 IS
‘‘(III) the amount of losses in-
1
curred by victims as a result of the
2
act or omission.
3
‘‘(ii) THIRD TIER ACT OR OMISSION.—
4
For the purposes of this subparagraph, the
5
term ‘third tier act or omission’ means an
6
act or omission described in paragraph (1)
7
that—
8
‘‘(I) involved fraud, deceit, ma-
9
nipulation, or deliberate or reckless
10
disregard of a regulatory requirement;
11
and
12
‘‘(II) directly or indirectly—
13
‘‘(aa) resulted in substantial
14
losses to other persons;
15
‘‘(bb) created a significant
16
risk of substantial losses to other
17
persons; or
18
‘‘(cc) resulted in substantial
19
pecuniary gain to the person who
20
committed the act or omission.’’.
21
(2) MONEY
PENALTIES
IN
CIVIL
ACTIONS.—
22
Section 209(e)(2) of the Investment Advisers Act of
23
1940 (15 U.S.C. 80b–9(e)(2)) is amended—
24
(A) in subparagraph (A)—
25
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[Text truncated for display. Full text available on Congress.gov.]