Compliance and Regulatory Services (“CARS”) Hot Topics for August 2015
For this monthly distribution, we are highlighting a bipartisan bill sponsored by Jack Reed (D-RI) and Chuck Grassley (R-IA) that would raise the SEC’s limits on securities fines and better enable them to tie penalties to scope of harm and crack down on repeat offenders.
The Stronger Enforcement of Civil Penalties Act (SEC Penalties Act) of 2015 increases civil penalties on an individual from a maximum of $160,000 per offense to $1,000,000 and institutions from $775,000 to $10,000,000. In other instances, penalties are calculated to equal the gross amount of ill-gotten gain. In the proposed legislation, the penalty cap would be a tripled for recidivists that have been held criminally and civilly liable for securities fraud within the past five years. These penalties can be assessed either by the SEC in-house (through administrative proceedings) or in federal court.
This bill is designed to give the SEC the firepower to make a difference in protecting investors by cracking down on fraudulent Wall Street activities. The legislative mandate to assess meaningful penalties just might change the dynamics of business for the better, especially when individuals face a potential monetary burden of $1,000,000. These levels of penalties may serve as an incentive to both individuals and firms to take compliance seriously and adopt comprehensive risk-based compliance programs that are reasonably designed to prevent, detect, and correct violations of applicable securities laws.
Our Take: We have heard some industry comments that this is just another method of government revenue-raising. However, through our compliance practice, CARS has recognized the SEC’s changing approach over the past 6-8 months by the way the SEC is dealing with clients during routine examinations and when violations of law occur. The SEC has leveled the playing field through its take-no-prisoners approach when dealing with violations, regardless of whether the subject firm or targeted entity is a small, medium or large firm. The best defense is to make sure you have an air-tight compliance program.
|July 16, 2015||The Need for Proactivity: Remarks at the 2015 National Association of Women Lawyers Annual Meeting and Awards Luncheon|
|July 15, 2015||Opening Remarks at the Compliance Outreach Program for Broker-Dealers|
(Complete Listing: http://www.finra.org/Industry/Regulation/Notices/2014/index.htm)
FINRA Rule Filings List
(Complete Listing: http://www.finra.org/Industry/Regulation/RuleFilings/2014/index.htm)