[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>