II 

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.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘SEC Civil Enforcement 

5 Act’’. 

6 SEC. 2. SECURITIES CIVIL ENFORCEMENT PROVISIONS. 

7 (a) AUTHORITY TO ASSESS CIVIL MONEY PEN8 ALTIES.—
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1 (1) SECURITIES ACT OF 1933.—Section 8A of 

2 the Securities Act of 1933 (15 U.S.C. 77h–1) is 

3 amended by adding at the end the following new 

4 subsection: 

5 ‘‘(g) AUTHORITY OF THE COMMISSION TO ASSESS

6 MONEY PENALTY.—

7 ‘‘(1) IN GENERAL.—In any cease-and-desist 

8 proceeding under subsection (a), the Commission 

9 may impose a civil monetary penalty if it finds, on 

10 the record after notice and opportunity for hearing, 

11 that a person is violating, has violated, or is or was 

12 a cause of the violation of, any provision of this title 

13 or any rule or regulation thereunder, and that such 

14 penalty is in the public interest. 

15 ‘‘(2) MAXIMUM AMOUNT OF PENALTY.—

16 ‘‘(A) FIRST TIER.—The maximum amount 

17 of penalty for each act or omission described in 

18 paragraph (1) shall be $100,000 for a natural 

19 person or $250,000 for any other person. 

20 ‘‘(B) SECOND TIER.—Notwithstanding 

21 subparagraph (A), the maximum amount of 

22 penalty for such act or omission described in 

23 paragraph (1) shall be $500,000 for a natural 

24 person or $1,000,000 for any other person, if 

25 the act or omission involved fraud, deceit, ma-
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1 nipulation, or deliberate or reckless disregard of 

2 a statutory or regulatory requirement. 

3 ‘‘(C) THIRD TIER.—Notwithstanding sub4 paragraphs (A) and (B), the maximum amount 

5 of penalty for each act or omission described in 

6 paragraph (1) shall be $1,000,000 for a natural 

7 person or $2,000,000 for any other person, if—

8 ‘‘(i) the act or omission involved 

9 fraud, deceit, manipulation, or deliberate 

10 or reckless disregard of a statutory or reg11 ulatory requirement; and 

12 ‘‘(ii) such act or omission directly or 

13 indirectly resulted in substantial losses or 

14 created a significant risk of substantial 

15 losses to other persons or resulted in sub16 stantial pecuniary gain to the person who 

17 committed the act or omission. 

18 ‘‘(3) EVIDENCE CONCERNING ABILITY TO

19 PAY.—In any proceeding in which the Commission 

20 or the appropriate regulatory agency may impose a 

21 penalty under this section, a respondent may present 

22 evidence of the ability of the respondent to pay such 

23 penalty. The Commission or the appropriate regu24 latory agency may, in its discretion, consider such 

25 evidence in determining whether the penalty is in the 
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1 public interest. Such evidence may relate to the ex2 tent of the person’s ability to continue in business 

3 and the collectability of a penalty, taking into ac4 count any other claims of the United States or third 

5 parties upon the assets of that person and the 

6 amount of the assets of that person.’’. 

7 (2) SECURITIES EXCHANGE ACT OF 1934.—Sec8 tion 21B(a) of the Securities Exchange Act of 1934 

9 (15 U.S.C. 78u–2(a)) is amended—

10 (A) in paragraph (4), by striking ‘‘super11 vision;’’ and all that follows through the end of 

12 the subsection and inserting ‘‘supervision.’’; 

13 (B) by redesignating paragraphs (1) 

14 through (4) as subparagraphs (A) through (D), 

15 respectively, and moving the margins 2 ems to 

16 the right; 

17 (C) by inserting ‘‘that such penalty is in 

18 the public interest and’’ after ‘‘hearing,’’; 

19 (D) by striking ‘‘In any proceeding’’ and 

20 inserting the following: 

21 ‘‘(1) IN GENERAL.—In any proceeding’’; and 

22 (E) by adding at the end the following: 

23 ‘‘(2) OTHER MONEY PENALTIES.—In any pro24 ceeding under section 21C against any person, the 

25 Commission may impose a civil monetary penalty if 
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1 it finds, on the record after notice and opportunity 

2 for hearing, that such person is violating, has vio3 lated, or is or was a cause of the violation of, any 

4 provision of this title or any rule or regulation there5 under, and that such penalty is in the public inter6 est.’’. 

7 (3) INVESTMENT COMPANY ACT OF 1940.—Sec8 tion 9(d)(1) of the Investment Company Act of 1940 

9 (15 U.S.C. 80a–9(d)(1)) is amended—

10 (A) in subparagraph (C), by striking 

11 ‘‘therein;’’ and all that follows through the end 

12 of the paragraph and inserting ‘‘supervision.’’; 

13 (B) by redesignating subparagraphs (A) 

14 through (C) as clauses (i) through (iii), respec15 tively, and moving the margins 2 ems to the 

16 right; 

17 (C) by inserting ‘‘that such penalty is in 

18 the public interest and’’ after ‘‘hearing,’’; 

19 (D) by striking ‘‘In any proceeding’’ and 

20 inserting the following: 

21 ‘‘(A) IN GENERAL.—In any proceeding’’; and 

22 (E) by adding at the end the following: 

23 ‘‘(B) OTHER MONEY PENALTIES.—In any 

24 proceeding under subsection (f) against any 

25 person, the Commission may impose a civil
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1 monetary penalty if it finds, on the record after 

2 notice and opportunity for hearing, that such 

3 person is violating, has violated, or is or was 

4 a cause of the violation of, any provision of this 

5 title or any rule or regulation thereunder, and 

6 that such penalty is in the public interest.’’. 

7 (4) INVESTMENT ADVISERS ACT OF 1940.—Sec8 tion 203(i)(1) of the Investment Advisers Act of 

9 1940 (15 U.S.C. 80b–3(i)(1)) is amended—

10 (A) in subparagraph (D), by striking ‘‘su11 pervision;’’ and all that follows through the end 

12 of the paragraph and inserting ‘‘supervision.’’; 

13 (B) by redesignating subparagraphs (A) 

14 through (D) as clauses (i) through (iv), respec15 tively, and moving the margins 2 ems to the 

16 right; 

17 (C) by inserting ‘‘that such penalty is in 

18 the public interest and’’ after ‘‘hearing,’’; 

19 (D) by striking ‘‘In any proceeding’’ and 

20 inserting the following: 

21 ‘‘(A) IN GENERAL.—In any proceeding’’; and 

22 (E) by adding at the end the following: 

23 ‘‘(B) OTHER MONEY PENALTIES.—In any 

24 proceeding under subsection (k) against any 

25 person, the Commission may impose a civil 
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1 monetary penalty if it finds, on the record after 

2 notice and opportunity for hearing, that such 

3 person is violating, has violated, or is or was a 

4 cause of the violation of, any provision of this 

5 title or any rule or regulation thereunder, and 

6 that such penalty is in the public interest.’’. 

7 (b) INCREASED MAXIMUM CIVIL MONEY PEN8 ALTIES.—

9 (1) SECURITIES ACT OF 1933.—Section 20(d)(2) 

10 of the Securities Act of 1933 (15 U.S.C. 77t(d)(2)) 

11 is amended—

12 (A) in subparagraph (A)(i)—

13 (i) by striking ‘‘$5,000’’ and inserting 

14 ‘‘$100,000’’; and 

15 (ii) by striking ‘‘$50,000’’ and insert16 ing ‘‘$250,000’’; 

17 (B) in subparagraph (B)(i)—

18 (i) by striking ‘‘$50,000’’ and insert19 ing ‘‘$500,000’’; and 

20 (ii) by striking ‘‘$250,000’’ and in21 serting ‘‘$1,000,000’’; and 

22 (C) in subparagraph (C)(i)—

23 (i) by striking ‘‘$100,000’’ and insert24 ing ‘‘$1,000,000’’; and 
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1 (ii) by striking ‘‘$500,000’’ and in2 serting ‘‘$2,000,000’’. 

3 (2) SECURITIES EXCHANGE ACT OF 1934.—

4 (A) PENALTIES.—Section 32 of the Securi5 ties Exchange Act of 1934 (15 U.S.C. 78ff) is 

6 amended—

7 (i) in subsection (b), by striking 

8 ‘‘$100’’ and inserting ‘‘$10,000’’; and 

9 (ii) in subsection (c)—

10 (I) in paragraph (1)(B), by strik11 ing ‘‘$10,000’’ and inserting 

12 ‘‘$500,000’’; and 

13 (II) in paragraph (2)(B), by 

14 striking ‘‘$10,000’’ and inserting 

15 ‘‘$500,000’’. 

16 (B) INSIDER TRADING.—Section 21A(a)(3) 

17 of the Securities Exchange Act of 1934 (15 

18 U.S.C. 78u–1(a)(3)) is amended by striking 

19 ‘‘$1,000,000’’ and inserting ‘‘$2,000,000’’. 

20 (C) ADMINISTRATIVE PROCEEDINGS.—Sec21 tion 21B(b) of the Securities Exchange Act of 

22 1934 (15 U.S.C. 78u–2(b)) is amended—

23 (i) in paragraph (1)—

24 (I) by striking ‘‘$5,000’’ and in25 serting ‘‘$100,000’’; and 
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1 (II) by striking ‘‘$50,000’’ and 

2 inserting ‘‘$250,000’’; 

3 (ii) in paragraph (2)—

4 (I) by striking ‘‘$50,000’’ and in5 serting ‘‘$500,000’’; and 

6 (II) by striking ‘‘$250,000’’ and 

7 inserting ‘‘$1,000,000’’; and 

8 (iii) in paragraph (3)—

9 (I) by striking ‘‘$100,000’’ and 

10 inserting ‘‘$1,000,000’’; and 

11 (II) by striking ‘‘$500,000’’ and 

12 inserting ‘‘$2,000,000’’. 

13 (D) CIVIL ACTIONS.—Section 21(d)(3)(B) 

14 of the Securities Exchange Act of 1934 (15 

15 U.S.C. 78u(d)(3)(B)) is amended—

16 (i) in clause (i)—

17 (I) by striking ‘‘$5,000’’ and in18 serting ‘‘$100,000’’; and 

19 (II) by striking ‘‘$50,000’’ and 

20 inserting ‘‘$250,000’’; 

21 (ii) in clause (ii)—

22 (I) by striking ‘‘$50,000’’ and in23 serting ‘‘$500,000’’; and 

24 (II) by striking ‘‘$250,000’’ and 

25 inserting ‘‘$1,000,000’’; and 
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1 (iii) in clause (iii)—

2 (I) by striking ‘‘$100,000’’ and 

3 inserting ‘‘$1,000,000’’; and 

4 (II) by striking ‘‘$500,000’’ and 

5 inserting ‘‘$2,000,000’’. 

6 (3) INVESTMENT COMPANY ACT OF 1940.—

7 (A) INELIGIBILITY.—Section 9(d)(2) of the 

8 Investment Company Act of 1940 (15 U.S.C. 

9 80a–9(d)(2)) is amended—

10 (i) in subparagraph (A)—

11 (I) by striking ‘‘$5,000’’ and in12 serting ‘‘$100,000’’; and 

13 (II) by striking ‘‘$50,000’’ and 

14 inserting ‘‘$250,000’’; 

15 (ii) in subparagraph (B)—

16 (I) by striking ‘‘$50,000’’ and in17 serting ‘‘$500,000’’; and 

18 (II) by striking ‘‘$250,000’’ and 

19 inserting ‘‘$1,000,000’’; and 

20 (iii) in subparagraph (C)—

21 (I) by striking ‘‘$100,000’’ and 

22 inserting ‘‘$1,000,000’’; and 

23 (II) by striking ‘‘$500,000’’ and 

24 inserting ‘‘$2,000,000’’. 
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1 (B) ENFORCEMENT OF INVESTMENT COM2 PANY ACT.—Section 42(e)(2) of the Investment 

3 Company Act of 1940 (15 U.S.C. 80a–

4 41(e)(2)) is amended—

5 (i) in subparagraph (A)—

6 (I) by striking ‘‘$5,000’’ and in7 serting ‘‘$100,000’’; and 

8 (II) by striking ‘‘$50,000’’ and 

9 inserting ‘‘$250,000’’; 

10 (ii) in subparagraph (B)—

11 (I) by striking ‘‘$50,000’’ and in12 serting ‘‘$500,000’’; and 

13 (II) by striking ‘‘$250,000’’ and 

14 inserting ‘‘$1,000,000’’; and 

15 (iii) in subparagraph (C)—

16 (I) by striking ‘‘$100,000’’ and 

17 inserting ‘‘$1,000,000’’; and 

18 (II) by striking ‘‘$500,000’’ and 

19 inserting ‘‘$2,000,000’’. 

20 (4) INVESTMENT ADVISERS ACT OF 1940.—

21 (A) REGISTRATION.—Section 203(i)(2) of 

22 the Investment advisers Act of 1940 (15 U.S.C. 

23 80b–3(i)(2)) is amended—

24 (i) in subparagraph (A)—
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1 (I) by striking ‘‘$5,000’’ and in2 serting ‘‘$100,000’’; and 

3 (II) by striking ‘‘$50,000’’ and 

4 inserting ‘‘$250,000’’; 

5 (ii) in subparagraph (B)—

6 (I) by striking ‘‘$50,000’’ and in7 serting ‘‘$500,000’’; and 

8 (II) by striking ‘‘$250,000’’ and 

9 inserting ‘‘$1,000,000’’; and 

10 (iii) in subparagraph (C)—

11 (I) by striking ‘‘$100,000’’ and 

12 inserting ‘‘$1,000,000’’; and 

13 (II) by striking ‘‘$500,000’’ and 

14 inserting ‘‘$2,000,000’’. 

15 (B) ENFORCEMENT OF INVESTMENT AD16 VISERS ACT.—Section 209(e)(2) of the Invest17 ment advisers Act of 1940 (15 U.S.C. 80b–

18 9(e)(2)) is amended—

19 (i) in subparagraph (A)—

20 (I) by striking ‘‘$5,000’’ and in21 serting ‘‘$100,000’’; and 

22 (II) by striking ‘‘$50,000’’ and 

23 inserting ‘‘$250,000’’; 

24 (ii) in subparagraph (B)—
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1 (I) by striking ‘‘$50,000’’ and in2 serting ‘‘$500,000’’; and 

3 (II) by striking ‘‘$250,000’’ and 

4 inserting ‘‘$1,000,000’’; and 

5 (iii) in subparagraph (C)—

6 (I) by striking ‘‘$100,000’’ and 

7 inserting ‘‘$1,000,000’’; and 

8 (II) by striking ‘‘$500,000’’ and 

9 inserting ‘‘$2,000,000’’. 

10 (c) AUTHORITY TO OBTAIN FINANCIAL RECORDS.—

11 Section 21(h) of the Securities Exchange Act of 1934 (15 

12 U.S.C. 78u(h)) is amended—

13 (1) by striking paragraphs (2) through (8); 

14 (2) in paragraph (9), by striking ‘‘(9)(A)’’ and 

15 all that follows through ‘‘(B) The’’ and inserting 

16 ‘‘(3) The’’; 

17 (3) by inserting after paragraph (1), the fol18 lowing: 

19 ‘‘(2) ACCESS TO FINANCIAL RECORDS.—

20 ‘‘(A) IN GENERAL.—Notwithstanding sec21 tion 1105 or 1107 of the Right to Financial 

22 Privacy Act of 1978, the Commission may ob23 tain access to and copies of, or the information 

24 contained in, financial records of any person 

25 held by a financial institution, including the fi-
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1 nancial records of a customer, without notice to 

2 that person, when it acts pursuant to a sub3 poena authorized by a formal order of investiga4 tion of the Commission and issued under the 

5 securities laws or pursuant to an administrative 

6 or judicial subpoena issued in a proceeding or 

7 action to enforce the securities laws. 

8 ‘‘(B) NONDISCLOSURE OF REQUESTS.—If 

9 the Commission so directs in its subpoena, no 

10 financial institution, or officer, director, part11 ner, employee, shareholder, representative or 

12 agent of such financial institution, shall, di13 rectly or indirectly, disclose that records have 

14 been requested or provided in accordance with 

15 subparagraph (A), if the Commission finds rea16 son to believe that such disclosure may—

17 ‘‘(i) result in the transfer of assets or 

18 records outside the territorial limits of the 

19 United States; 

20 ‘‘(ii) result in improper conversion of 

21 investor assets; 

22 ‘‘(iii) impede the ability of the Com23 mission to identify, trace, or freeze funds 

24 involved in any securities transaction; 
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1 ‘‘(iv) endanger the life or physical 

2 safety of an individual; 

3 ‘‘(v) result in flight from prosecution; 

4 ‘‘(vi) result in destruction of or tam5 pering with evidence; 

6 ‘‘(vii) result in intimidation of poten7 tial witnesses; or 

8 ‘‘(viii) otherwise seriously jeopardize 

9 an investigation or unduly delay a trial. 

10 ‘‘(C) TRANSFER OF RECORDS TO GOVERN11 MENT AUTHORITIES.—The Commission may 

12 transfer financial records or the information 

13 contained therein to any government authority, 

14 if the Commission proceeds as a transferring 

15 agency in accordance with section 1112 of the 

16 Right to Financial Privacy Act of 1978 (12 

17 U.S.C. 3412), except that a customer notice 

18 shall not be required under subsection (b) or (c) 

19 of that section 1112, if the Commission deter20 mines that there is reason to believe that such 

21 notification may result in or lead to any of the 

22 factors identified under clauses (i) through 

23 (viii) of subparagraph (B) of this paragraph.’’; 

24 (4) by striking paragraph (10); and 
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1 (5) by redesignating paragraphs (11), (12), and 

2 (13) as paragraphs (4), (5), and (6), respectively.

Æ