[Congressional Record Volume 161, Number 106 (Thursday, July 9, 2015)]
[Senate]
[Page S4956]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED (for himself, Mr. Grassley, and Mr. Leahy):
  S. 1730. A bill to enhance civil penalties under the Federal 
securities laws, and for other purposes; to the Committee on Banking, 
Housing, and Urban Affairs.
  Mr. REED. Mr. President, the Stronger Enforcement of Civil Penalties 
Act, which I am pleased to be introducing today with Senator Grassley 
and Senator Leahy, will enhance the ability of securities regulators to 
protect investors and demand greater accountability from market 
players. Unfortunately, even after the financial crisis that crippled 
the economy, we continue to see calculated wrongdoing by some on Wall 
Street. Without the consequence of meaningful penalties to serve as an 
effective deterrent, I fear this disturbing culture of misconduct will 
persist.
  The existing regime for securities law violations limits by statute 
the amount of penalties the Securities and Exchange Commission, SEC, 
can fine an institution or individual. During hearings I held in 2011 
in the Securities, Insurance, and Investment Banking Subcommittee, I 
learned how this limitation significantly interferes with the SEC's 
ability to perform its enforcement duties. At that time, the agency had 
been criticized by a Federal judge for not obtaining a larger 
settlement against Citigroup, a major player in the financial crisis 
that settled with the SEC in an amount that was a fraction of the cost 
the bank had inflicted on investors. The SEC explained that the reason 
for the low settlement amount was a statutory prohibition from levying 
a larger penalty.
  The bipartisan bill Senator Grassley and I are introducing updates 
and strengthens the SEC's civil penalties statute. It aims to make 
potential and current offenders think twice before engaging in 
misconduct by increasing the maximum civil monetary penalties permitted 
by statute, directly linking the size of the maximum penalties to the 
amount of losses suffered by victims of a violation, and substantially 
raising the financial stakes for repeat offenders of our nation's 
securities laws.
  Specifically, our bill would give the SEC more options to tailor 
penalties to the specific circumstances of a given violation. In 
addition to raising the per violation caps for severe, or ``tier 
three,'' violations to $1 million per offense for individuals and $10 
million per offense for entities, the bill would also give the SEC 
additional options to obtain greater penalties based on the ill-gotten 
gains of the violator or on the financial harm to investors.
  Our bill also addresses the disconcerting trend of repeat offenders 
on Wall Street through two provisions. The first would allow the SEC to 
triple the penalty cap applicable to recidivists who have been held 
either criminally or civilly liable for securities fraud within the 
preceding five years. The second would allow the SEC to seek a civil 
penalty against those that violate existing federal court or SEC 
orders, an approach that would be more efficient, effective, and 
flexible than the current civil contempt remedy. These two changes 
would substantially improve the ability of the SEC's enforcement 
program to ratchet up penalties for recidivists.
  More than half of all U.S. households own securities. They deserve a 
strong cop on the beat that has the tools it needs to go after 
fraudsters and pursue the difficult cases arising from our increasingly 
complex financial markets. The Stronger Enforcement of Civil Penalties 
Act will give the SEC more tools to demand meaningful accountability 
from Wall Street, which in turn will increase transparency and 
confidence in our financial system. I urge our colleagues to support 
this important bipartisan legislation to enhance the SEC's ability to 
protect investors and crack down on fraud.
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