[Pages S6793-S6794]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED (for himself and Mr. Grassley):
  S. 2920. 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 introducing the Stronger 
Enforcement of Civil Penalties Act along with Senator Grassley. Our 
bipartisan bill will help securities regulators better protect 
investors and demand greater accountability from market players. 
Despite the regulatory reforms made after the financial crisis, 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. I 
learned how this limitation significantly interferes with the SEC's 
ability to execute its enforcement duties during my time as the 
chairman of the Banking Committee's Securities, Insurance, and 
Investment Subcommittee in 2011. Around then, a Federal judge 
criticized the SEC for not pursuing a larger settlement against 
Citigroup, a major actor in the financial crisis. The judge rightly 
noted that Citigroup had settled with the Agency for an amount that was 
far below the cost the bank had inflicted on investors. The SEC, 
however, 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, a decade later, the 
SEC's statutory authority remains unchanged, and the Agency's deterrent 
effect remains limited even though securities fraud is still as 
prevalent as ever.
  The bipartisan bill we are introducing will discourage 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 circumstances of a given violation. In addition to 
raising the per violation caps for severe, or ``thirds 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 has two provisions to deter repeat offenders on Wall 
Street. 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 than the current civil contempt 
remedy. These updates would reinforce the

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SEC's ability to levy tough penalties against repeat offenders.
  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, deter bad actor, and maintain confidence in our 
financial system. I urge our colleagues to support this important 
bipartisan legislation.
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