[Congressional Record Volume 169, Number 49 (Thursday, March 16, 2023)]
[Senate]
[Pages S827-S828]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED (for himself and Mr. Grassley):
  S. 837. 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. Madam President, today I am introducing the Stronger 
Enforcement of Civil Penalties Act along with Senator Grassley. This 
bill will help securities regulators better protect investors and 
demand greater accountability from market players. Even in the midst of 
an unprecedented public health and economic emergency, 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.
  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 execute 
its enforcement duties. At that time, a Federal judge had criticized 
the SEC for not obtaining a larger settlement against Citigroup, a 
major actor 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 indicated that a statutory prohibition against levying a larger 
penalty led to the low settlement amount. Indeed, in the immediate 
aftermath of the financial crisis, then-SEC Chairman Mary Schapiro 
explained that ``the Commission's statutory authority to obtain civil 
monetary penalties with appropriate deterrent effect is limited in many 
circumstances.'' Unfortunately, the SEC's statutory authority remains 
unchanged and the Agency's deterrent effect remains limited--even 
though securities fraud has not abated.

[[Page S828]]

  The bipartisan bill we are introducing aims 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outdated civil penalties statutes.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 
raising 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 increasing the financial 
stakes for serial offenders of our Nation's securities laws.
  Specifically, our bill would broaden the SEC's options to tailor 
penalties to the particular 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 more options to collect greater penalties based on the ill-gotten 
gains of the violator or on the financial harm to investors.
  Our bill also seeks to deter repeat offenders on Wall Street through 
two provisions. The first would authorize 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 5 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 to the current civil contempt 
remedy. These updates would greatly enhance the SEC's ability to levy 
tough penalties against repeat offenders.
  The SEC's current Director of Enforcement said several months ago 
that ``a centerpiece'' of the Agency's efforts to ``hold wrongdoers 
accountable and deter future misconduct . . . is ensuring that we are 
using every tool in our toolkit, including penalties that have a 
deterrent effect and are viewed as more than the cost of doing 
business.'' Our bill will strengthen the SEC's existing tools, which 
will further increase deterrence and substantially ratchet up the costs 
of committing fraud.
  All of our constituents deserve a strong regulator 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.
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