[Congressional Record Volume 165, Number 99 (Thursday, June 13, 2019)]
[Senate]
[Pages S3481-S3482]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED (for himself, Mr. Grassley, and Mr. Leahy):
  S. 1854. 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, today I am reintroducing the Stronger 
Enforcement of Civil Penalties Act along with Senator Grassley and 
Senator Leahy. This bill will help securities regulators better protect 
investors and demand greater accountability from market players. Even 
after a financial crisis that devastated our nation's economy, we 
continue to see calculated wrongdoing by some on Wall Street, and 
without the consequence of meaningful penalties to serve as an 
effective deterrent, I worry this disturbing culture of misconduct will 
persist.
  Today, the amount of penalties the Securities and Exchange Commission 
(SEC) can fine an institution or individual is restricted by statute. 
During hearings I held in 2011 as Chairman of the Banking Committee's 
Securities, Insurance, and Investment Subcommittee, I learned how this 
limitation significantly interferes with the SEC's ability to perform 
its enforcement duties. At that time, a Federal judge had criticized 
the SEC for not obtaining a larger settlement against Citigroup, a 
major player in the financial crisis that settled with the agency in an 
amount that was far below the cost the bank had inflicted on investors. 
The SEC explained that a statutory prohibition against levying a larger 
penalty led to the low settlement amount. Indeed, then SEC Chairman

[[Page S3482]]

Mary L. Schapiro in 2011 also explained that ``the Commission's 
statutory authority to obtain civil monetary penalties with appropriate 
deterrent effect is limited in many circumstances.''
  The bipartisan bill we are reintroducing seeks to update the SEC's 
outdated civil penalties statutes. This bill strives to make potential 
and current offenders think twice before engaging in misconduct by 
increasing the maximum statutory civil monetary penalties, directly 
linking the size of the 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 expand the SEC's options to tailor 
penalties to the specific circumstances of a given violation. In 
addition to raising the per violation caps for severe, or ``third 
tier,'' violations to $1 million per offense for individuals and $10 
million per offense for entities, the legislation 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 strives to deter 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 previous 
five years. The second would allow the SEC to seek a civil penalty 
against those who violate existing federal court or SEC orders, an 
approach that would be more efficient, effective, and flexible than the 
current civil contempt remedy. These changes would greatly improve the 
SEC's ability to levy robust penalties against repeat offenders.
  Slightly more than half of all U.S. households are invested in the 
stock market. All of our constituents deserve a strong cop on the beat 
that has the necessary tools to go after fraudsters and pursue the 
difficult cases arising from our increasingly complex financial 
markets. The Stronger Enforcement of Civil Penalties Act will enhance 
the SEC's ability 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.
                                 ______