Document ID: ./input/supremecourt_opinions/opinions/23pdf/22-859new_kjfm.pdf
Page Number: 15

10 

SEC v. JARKESY 

Opinion of the Court 

Advisers Act condition the availability of civil penalties on 
six statutory factors: (1) whether the alleged misconduct in-
volved fraud, deceit, manipulation, or deliberate or reckless 
disregard  for  regulatory  requirements,  (2)  whether  it 
caused harm, (3) whether it resulted in unjust enrichment,
accounting  for  any  restitution  made,  (4)  whether  the  de-
fendant had previously violated securities laws or regula-
tions, or had previously committed certain crimes, (5) the
need for deterrence, and (6) other “matters as justice may
require.”  §§78u–2(c), 80b–3(i)(3).  Of these, several concern 
culpability,  deterrence,  and  recidivism.    Because  they  tie
the  availability  of  civil  penalties  to  the  perceived  need  to
punish  the  defendant  rather  than  to  restore  the  victim, 
such considerations are legal rather than equitable.

The same is true of the criteria that determine the size of 
the  available  remedy.  The  Securities  Act,  the  Securities 
Exchange Act, and the Investment Advisers Act establish
three “tiers” of civil penalties.  See §§77h–1(g)(2), 78u–2(b), 
80b–3(i)(2).  Violating a federal securities law or regulation
exposes  a  defendant  to  a  first  tier  penalty.    A  second  tier 
penalty may be ordered if the violation involved fraud, de-
ceit,  manipulation,  or  deliberate  or  reckless  disregard  for 
regulatory requirements.  Finally, if those acts also resulted 
in substantial gains to the defendant or losses to another,
or created a “significant risk” of the latter, the defendant is 
subject to a third tier penalty.  Each successive tier author-
izes a larger monetary sanction.  See ibid. 

Like the considerations that determine the availability of
civil  penalties  in  the  first  place,  the  criteria  that  divide 
these tiers are also legal in nature.  Each tier conditions the 
available  penalty  on  the  culpability  of  the  defendant  and 
the need for deterrence, not the size of the harm that must 
be remedied.  Indeed, showing that a victim suffered harm
is not even required to advance a defendant from one tier to 
the  next.  Since  nothing  in  this  analysis  turns  on  “res-
tor[ing] the status quo,” Tull, 481 U. S., at 422, these factors