[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 3416 Introduced in Senate (IS)]

112th CONGRESS
  2d Session
                                S. 3416

 To enhance civil penalties under the Federal securities laws, and for 
                            other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 23, 2012

Mr. Reed (for himself and Mr. Grassley) introduced the following bill; 
which was read twice and referred to the Committee on Banking, Housing, 
                           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 Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Stronger Enforcement of Civil 
Penalties Act of 2012''.

SEC. 2. UPDATED CIVIL MONEY PENALTIES FOR SECURITIES LAWS VIOLATIONS.

    (a) Securities Act of 1933.--
            (1) Money penalties in administrative actions.--Section 
        8A(g)(2) of the Securities Act of 1933 (15 U.S.C. 77h-1(g)(2)) 
        is amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``$7,500'' and inserting 
                        ``$10,000''; and
                            (ii) by striking ``$75,000'' and inserting 
                        ``$100,000'';
                    (B) in subparagraph (B)--
                            (i) by striking ``$75,000'' and inserting 
                        ``$100,000''; and
                            (ii) by striking ``$375,000'' and inserting 
                        ``$500,000''; and
                    (C) by amending subparagraph (C) to read as 
                follows:
                    ``(C) Third tier.--Notwithstanding subparagraphs 
                (A) and (B), the amount of penalty for each such act or 
                omission shall not exceed the greater of--
                            ``(i) $1,000,000 for a natural person or 
                        $10,000,000 for any other person;
                            ``(ii) 3 times the gross amount of 
                        pecuniary gain to the person who committed the 
                        act or omission; or
                            ``(iii) the amount of losses incurred by 
                        victims as a result of the act or omission, 
                        if--
                                    ``(I) the act or omission described 
                                in paragraph (1) involved fraud, 
                                deceit, manipulation, or deliberate or 
                                reckless disregard of a regulatory 
                                requirement; and
                                    ``(II) such act or omission 
                                directly or indirectly resulted in--
                                            ``(aa) substantial losses 
                                        or created a significant risk 
                                        of substantial losses to other 
                                        persons; or
                                            ``(bb) substantial 
                                        pecuniary gain to the person 
                                        who committed the act or 
                                        omission.''.
            (2) Money penalties in civil actions.--Section 20(d)(2) of 
        the Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                            (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                    (B) in subparagraph (B)--
                            (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                            (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                    (C) in subparagraph (C), by striking ``greater of 
                (i) $100,000 for a natural person or $500,000 for any 
                other person, or (ii) the gross amount of pecuniary 
                gain to such defendant as a result of the violation'' 
                and inserting the following: ``greater of--
                            ``(i) $1,000,000 for a natural person or 
                        $10,000,000 for any other person;
                            ``(ii) 3 times the gross amount of 
                        pecuniary gain to such defendant as a result of 
                        the violation; or
                            ``(iii) the amount of losses incurred by 
                        victims as a result of the violation''.
    (b) Securities Exchange Act of 1934.--
            (1) Money penalties in civil actions.--Section 21(d)(3)(B) 
        of the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(B)) 
        is amended--
                    (A) in clause (i)--
                            (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                            (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                    (B) in clause (ii)--
                            (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                            (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                    (C) in clause (iii), by striking ``greater of (I) 
                $100,000 for a natural person or $500,000 for any other 
                person, or (II) the gross amount of pecuniary gain to 
                such defendant as a result of the violation'' and 
                inserting the following: ``greater of--
                                    ``(I) $1,000,000 for a natural 
                                person or $10,000,000 for any other 
                                person;
                                    ``(II) 3 times the gross amount of 
                                pecuniary gain to such defendant as a 
                                result of the violation; or
                                    ``(III) the amount of losses 
                                incurred by victims as a result of the 
                                violation''.
            (2) Money penalties in administrative actions.--Section 
        21B(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78u-
        2(b)) is amended--
                    (A) in paragraph (1)--
                            (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                            (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                    (B) in paragraph (2)--
                            (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                            (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                    (C) by amending paragraph (3) to read as follows:
            ``(3) Third tier.--Notwithstanding paragraphs (1) and (2), 
        the amount of penalty for each such act or omission shall not 
        exceed the greater of--
                    ``(A) $1,000,000 for a natural person or 
                $10,000,000 for any other person;
                    ``(B) 3 times the gross amount of pecuniary gain to 
                the person who committed the act or omission; or
                    ``(C) the amount of losses incurred by victims as a 
                result of the act or omission, if--
                            ``(i) the act or omission described in 
                        subsection (a) involved fraud, deceit, 
                        manipulation, or deliberate or reckless 
                        disregard of a 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.''.
    (c) Investment Company Act of 1940.--
            (1) Money penalties in administrative actions.--Section 
        9(d)(2) of the Investment Company Act of 1940 (15 U.S.C. 80a-
        9(d)(2)) is amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                            (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                    (B) in subparagraph (B)--
                            (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                            (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                    (C) by amending subparagraph (C) to read as 
                follows:
                    ``(C) Third tier.--Notwithstanding subparagraphs 
                (A) and (B), the amount of penalty for each such act or 
                omission shall not exceed the greater of--
                            ``(i) $1,000,000 for a natural person or 
                        $10,000,000 for any other person;
                            ``(ii) 3 times the gross amount of 
                        pecuniary gain to the person who committed the 
                        act or omission; or
                            ``(iii) the amount of losses incurred by 
                        victims as a result of the act or omission, 
                        if--
                                    ``(I) the act or omission described 
                                in paragraph (1) involved fraud, 
                                deceit, manipulation, or deliberate or 
                                reckless disregard of a 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.''.
            (2) Money penalties in civil actions.--Section 42(e)(2) of 
        the Investment Company Act of 1940 (15 U.S.C. 80a-41(e)(2)) is 
        amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                            (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                    (B) in subparagraph (B)--
                            (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                            (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                    (C) in subparagraph (C), by striking ``greater of 
                (i) $100,000 for a natural person or $500,000 for any 
                other person, or (ii) the gross amount of pecuniary 
                gain to such defendant as a result of the violation'' 
                and inserting the following: ``greater of--
                            ``(i) $1,000,000 for a natural person or 
                        $10,000,000 for any other person;
                            ``(ii) 3 times the gross amount of 
                        pecuniary gain to such defendant as a result of 
                        the violation; or
                            ``(iii) the amount of losses incurred by 
                        victims as a result of the violation''.
    (d) Investment Advisers Act of 1940.--
            (1) Money penalties in administrative actions.--Section 
        203(i)(2) of the Investment Advisers Act of 1940 (15 U.S.C. 
        80b-3(i)(2)) is amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                            (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                    (B) in subparagraph (B)--
                            (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                            (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                    (C) by amending subparagraph (C) to read as 
                follows:
                    ``(C) Third tier.--Notwithstanding subparagraphs 
                (A) and (B), the amount of penalty for each such act or 
                omission shall not exceed the greater of--
                            ``(i) $1,000,000 for a natural person or 
                        $10,000,000 for any other person;
                            ``(ii) 3 times the gross amount of 
                        pecuniary gain to the person who committed the 
                        act or omission; or
                            ``(iii) the amount of losses incurred by 
                        victims as a result of the act or omission, 
                        if--
                                    ``(I) the act or omission described 
                                in paragraph (1) involved fraud, 
                                deceit, manipulation, or deliberate or 
                                reckless disregard of a 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.''.
            (2) Money penalties in civil actions.--Section 209(e)(2) of 
        the Investment Advisers Act of 1940 (15 U.S.C. 80b-9(e)(2)) is 
        amended--
                    (A) in subparagraph (A)--
                            (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                            (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                    (B) in subparagraph (B)--
                            (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                            (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                    (C) in subparagraph (C), by striking ``greater of 
                (i) $100,000 for a natural person or $500,000 for any 
                other person, or (ii) the gross amount of pecuniary 
                gain to such defendant as a result of the violation'' 
                and inserting the following: ``greater of--
                            ``(i) $1,000,000 for a natural person or 
                        $10,000,000 for any other person;
                            ``(ii) 3 times the gross amount of 
                        pecuniary gain to such defendant as a result of 
                        the violation; or
                            ``(iii) the amount of losses incurred by 
                        victims as a result of the violation''.

SEC. 3. PENALTIES FOR RECIDIVISTS.

    (a) Securities Act of 1933.--
            (1) Cease-and-desist proceedings.--Section 8A(g)(2) of the 
        Securities Act of 1933 (15 U.S.C. 77h-1(g)(2)) is amended by 
        adding at the end the following:
                    ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), the maximum amount of penalty for 
                each such act or omission shall be 3 times the 
                otherwise applicable amount in such subparagraphs if, 
                within the 5-year period preceding such act or 
                omission, the person who committed the act or omission 
                was criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that person.''.
            (2) Injunctions and prosecution of offenses.--Section 
        20(d)(2) of the Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is 
        amended by adding at the end the following:
                    ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), the maximum amount of penalty for 
                each such violation shall be 3 times the otherwise 
                applicable amount in such subparagraphs if, within the 
                5-year period preceding such violation, the defendant 
                was criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that defendant.''.
    (b) Securities Exchange Act of 1934.--
            (1) Civil actions.--Section 21(d)(3)(B) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(B)) is amended by 
        adding at the end the following:
                            ``(iv) Fourth tier.--Notwithstanding 
                        clauses (i), (ii), and (iii), the maximum 
                        amount of penalty for each such violation shall 
                        be 3 times the otherwise applicable amount in 
                        such clauses if, within the 5-year period 
                        preceding such violation, the defendant was 
                        criminally convicted for securities fraud or 
                        became subject to a judgment or order imposing 
                        monetary, equitable, or administrative relief 
                        in any Commission action alleging fraud by that 
                        defendant.''.
            (2) Administrative proceedings.--Section 21B(b) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78u-2(b)) is amended 
        by adding at the end the following:
            ``(4) Fourth tier.--Notwithstanding paragraphs (1), (2), 
        and (3), the maximum amount of penalty for each such act or 
        omission shall be 3 times the otherwise applicable amount in 
        such paragraphs if, within the 5-year period preceding such act 
        or omission, the person who committed the act or omission was 
        criminally convicted for securities fraud or became subject to 
        a judgment or order imposing monetary, equitable, or 
        administrative relief in any Commission action alleging fraud 
        by that person.''.
    (c) Investment Company Act of 1940.--
            (1) Ineligibility of certain underwriters and affiliates.--
        Section 9(d)(2) of the Investment Company Act of 1940 (15 
        U.S.C. 80a-9(d)(2)) is amended by adding at the end the 
        following:
                    ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), the maximum amount of penalty for 
                each such act or omission shall be 3 times the 
                otherwise applicable amount in such subparagraphs if, 
                within the 5-year period preceding such act or 
                omission, the person who committed the act or omission 
                was criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that person.''.
            (2) Enforcement.--Section 42(e)(2) of the Investment 
        Company Act of 1940 (15 U.S.C. 80a-41(e)(2)) is amended by 
        adding at the end the following:
                    ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), the maximum amount of penalty for 
                each such violation shall be 3 times the otherwise 
                applicable amount in such subparagraphs if, within the 
                5-year period preceding such violation, the defendant 
                was criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that defendant.''.
    (d) Investment Advisers Act of 1940.--The Investment Advisers Act 
of 1940 (15 U.S.C. 80b-1 et seq.) is amended--
            (1) in section 203(i)(2) (15 U.S.C. 80b-3(i)(2)), by adding 
        at the end the following:
                    ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), the maximum amount of penalty for 
                each such act or omission shall be 3 times the 
                otherwise applicable amount in such subparagraphs if, 
                within the 5-year period preceding such act or 
                omission, the person who committed the act or omission 
                was criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that person.''; and
            (2) in section 209(e)(2) (15 U.S.C. 80b-9(e)(2)) by adding 
        at the end the following:
                    ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), the maximum amount of penalty for 
                each such violation shall be 3 times the otherwise 
                applicable amount in such subparagraphs if, within the 
                5-year period preceding such violation, the defendant 
                was criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that defendant.''.

SEC. 4. VIOLATIONS OF INJUNCTIONS AND BARS.

    (a) Securities Act of 1933.--Section 20(d) of the Securities Act of 
1933 (15 U.S.C. 77t(d)) is amended--
            (1) in paragraph (1), by inserting after ``the rules or 
        regulations thereunder,'' the following: ``a Federal court 
        injunction or a bar obtained or entered by the Commission under 
        this title,''; and
            (2) by amending paragraph (4) to read as follows:
            ``(4) Special provisions relating to a violation of an 
        injunction or certain orders.--
                    ``(A) In general.--Each separate violation of an 
                injunction or order described in subparagraph (B) shall 
                be a separate offense, except that in the case of a 
                violation through a continuing failure to comply with 
                such injunction or order, each day of the failure to 
                comply with the injunction or order shall be deemed a 
                separate offense.
                    ``(B) Injunctions and orders.--Subparagraph (A) 
                shall apply with respect to any action to enforce--
                            ``(i) a Federal court injunction obtained 
                        pursuant to this title;
                            ``(ii) an order entered or obtained by the 
                        Commission pursuant to this title that bars, 
                        suspends, places limitations on the activities 
                        or functions of, or prohibits the activities 
                        of, a person; or
                            ``(iii) a cease-and-desist order entered by 
                        the Commission pursuant to section 8A.''.
    (b) Securities Exchange Act of 1934.--Section 21(d)(3) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)) is amended--
            (1) in subparagraph (A), by inserting after ``the rules or 
        regulations thereunder,'' the following: ``a Federal court 
        injunction or a bar obtained or entered by the Commission under 
        this title,''; and
            (2) by amending subparagraph (D) to read as follows:
                    ``(D) Special provisions relating to a violation of 
                an injunction or certain orders.--
                            ``(i) In general.--Each separate violation 
                        of an injunction or order described in clause 
                        (ii) shall be a separate offense, except that 
                        in the case of a violation through a continuing 
                        failure to comply with such injunction or 
                        order, each day of the failure to comply with 
                        the injunction or order shall be deemed a 
                        separate offense.
                            ``(ii) Injunctions and orders.--Clause (i) 
                        shall apply with respect to an action to 
                        enforce--
                                    ``(I) a Federal court injunction 
                                obtained pursuant to this title;
                                    ``(II) an order entered or obtained 
                                by the Commission pursuant to this 
                                title that bars, suspends, places 
                                limitations on the activities or 
                                functions of, or prohibits the 
                                activities of, a person; or
                                    ``(III) a cease-and-desist order 
                                entered by the Commission pursuant to 
                                section 21C.''.
    (c) Investment Company Act of 1940.--Section 42(e) of the 
Investment Company Act of 1940 (15 U.S.C. 80a-41(e)) is amended--
            (1) in paragraph (1), by inserting after ``the rules or 
        regulations thereunder,'' the following: ``a Federal court 
        injunction or a bar obtained or entered by the Commission under 
        this title,''; and
            (2) by amending paragraph (4) to read as follows:
            ``(4) Special provisions relating to a violation of an 
        injunction or certain orders.--
                    ``(A) In general.--Each separate violation of an 
                injunction or order described in subparagraph (B) shall 
                be a separate offense, except that in the case of a 
                violation through a continuing failure to comply with 
                such injunction or order, each day of the failure to 
                comply with the injunction or order shall be deemed a 
                separate offense.
                    ``(B) Injunctions and orders.--Subparagraph (A) 
                shall apply with respect to any action to enforce--
                            ``(i) a Federal court injunction obtained 
                        pursuant to this title;
                            ``(ii) an order entered or obtained by the 
                        Commission pursuant to this title that bars, 
                        suspends, places limitations on the activities 
                        or functions of, or prohibits the activities 
                        of, a person; or
                            ``(iii) a cease-and-desist order entered by 
                        the Commission pursuant to section 9(f).''.
    (d) Investment Advisers Act of 1940.--Section 209(e) of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-9(e)) is amended--
            (1) in paragraph (1), by inserting after ``the rules or 
        regulations thereunder,'' the following: ``a Federal court 
        injunction or a bar obtained or entered by the Commission under 
        this title,''; and
            (2) by amending paragraph (4) to read as follows:
            ``(4) Special provisions relating to a violation of an 
        injunction or certain orders.--
                    ``(A) In general.--Each separate violation of an 
                injunction or order described in subparagraph (B) shall 
                be a separate offense, except that in the case of a 
                violation through a continuing failure to comply with 
                such injunction or order, each day of the failure to 
                comply with the injunction or order shall be deemed a 
                separate offense.
                    ``(B) Injunctions and orders.--Subparagraph (A) 
                shall apply with respect to any action to enforce--
                            ``(i) a Federal court injunction obtained 
                        pursuant to this title;
                            ``(ii) an order entered or obtained by the 
                        Commission pursuant to this title that bars, 
                        suspends, places limitations on the activities 
                        or functions of, or prohibits the activities 
                        of, a person; or
                            ``(iii) a cease-and-desist order entered by 
                        the Commission pursuant to section 203(k).''.
                                 <all>