Title 15, Commerce and TradeRelease 119-110
§78u–2 Civil Remedies in Administrative Proceedings
Title 15 › CHAPTER 2B — SECURITIES EXCHANGES › § 78u–2
Summary
The SEC or the right regulator can fine people in enforcement or cease-and-desist cases. They must notify the person and give a hearing first. A fine can happen if the person intentionally broke securities laws or rules, helped or caused someone else to break them, lied or left out important facts in filings or proceedings, or failed to reasonably supervise someone who then broke the rules. In cease-and-desist cases a fine can also be imposed when a person is violating or caused a violation. Penalties per act are set in three tiers: first tier is $5,000 for a natural person and $50,000 for any other person; second tier (if the act involved fraud, deceit, manipulation, or deliberate or reckless disregard) is $50,000 for a natural person and $250,000 for any other person; third tier (if the act involved those things and caused big losses or big gains) is $100,000 for a natural person and $500,000 for any other person. The agency may look at things like fraud, harm to others, unfair profits and any restitution, past violations or convictions, the need to deter others, and other fair matters. A person can show they cannot pay, and the agency may consider their ability to keep doing business and whether a fine can be collected. The agency can also order accounting and return of ill-gotten gains with reasonable interest and make rules about payments. Clearing agencies and security-based swap dealers or major participants that knowingly or recklessly evade clearing rules must pay double the usual penalty.
Full Legal Text
Title 15, §78u–2
Commerce and Trade, Source: USLM XML via OLRC
(a)Commission authority to assess money penalties
(1)In general
In any proceeding instituted pursuant to section 78o(b)(4), 78o(b)(6), 78o–6, 78o–4, 78o–5, 78o–7, or 78q–1 of this title against any person, the Commission or the appropriate regulatory agency may impose a civil penalty if it finds, on the record after notice and opportunity for hearing, that such penalty is in the public interest and that such person—
(A)has willfully violated any provision of the Securities Act of 1933 [15 U.S.C. 77a et seq.], the Investment Company Act of 1940 [15 U.S.C. 80a–1 et seq.], the Investment Advisers Act of 1940 [15 U.S.C. 80b–1 et seq.], or this chapter, or the rules or regulations thereunder, or the rules of the Municipal Securities Rulemaking Board;
(B)has willfully aided, abetted, counseled, commanded, induced, or procured such a violation by any other person;
(C)has willfully made or caused to be made in any application for registration or report required to be filed with the Commission or with any other appropriate regulatory agency under this chapter, or in any proceeding before the Commission with respect to registration, any statement which was, at the time and in the light of the circumstances under which it was made, false or misleading with respect to any material fact, or has omitted to state in any such application or report any material fact which is required to be stated therein; or
(D)has failed reasonably to supervise, within the meaning of section 78o(b)(4)(E) of this title, with a view to preventing violations of the provisions of such statutes, rules and regulations, another person who commits such a violation, if such other person is subject to his supervision;
(2)Cease-and-desist proceedings
In any proceeding instituted under section 78u–3 of this title against any person, the Commission may impose a civil penalty, if the Commission finds, on the record after notice and opportunity for hearing, that such person—
(A)is violating or has violated any provision of this chapter, or any rule or regulation issued under this chapter; or
(B)is or was a cause of the violation of any provision of this chapter, or any rule or regulation issued under this chapter.
(b)Maximum amount of penalty
(1)First tier
The maximum amount of penalty for each act or omission described in subsection (a) shall be $5,000 for a natural person or $50,000 for any other person.
(2)Second tier
Notwithstanding paragraph (1), the maximum amount of penalty for each such act or omission shall be $50,000 for a natural person or $250,000 for any other person if the act or omission described in subsection (a) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement.
(3)Third tier
Notwithstanding paragraphs (1) and (2), the maximum amount of penalty for each such act or omission shall be $100,000 for a natural person or $500,000 for any other person if—
(A)the act or omission described in subsection (a) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and
(B)such act or omission directly or indirectly resulted in substantial losses or created a significant risk of substantial losses to other persons or resulted in substantial pecuniary gain to the person who committed the act or omission.
(c)Determination of public interest
In considering under this section whether a penalty is in the public interest, the Commission or the appropriate regulatory agency may consider—
(1)whether the act or omission for which such penalty is assessed involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement;
(2)the harm to other persons resulting either directly or indirectly from such act or omission;
(3)the extent to which any person was unjustly enriched, taking into account any restitution made to persons injured by such behavior;
(4)whether such person previously has been found by the Commission, another appropriate regulatory agency, or a self-regulatory organization to have violated the Federal securities laws, State securities laws, or the rules of a self-regulatory organization, has been enjoined by a court of competent jurisdiction from violations of such laws or rules, or has been convicted by a court of competent jurisdiction of violations of such laws or of any felony or misdemeanor described in section 78o(b)(4)(B) of this title;
(5)the need to deter such person and other persons from committing such acts or omissions; and
(6)such other matters as justice may require.
(d)Evidence concerning ability to pay
In any proceeding in which the Commission or the appropriate regulatory agency may impose a penalty under this section, a respondent may present evidence of the respondent’s ability to pay such penalty. The Commission or the appropriate regulatory agency may, in its discretion, consider such evidence in determining whether such penalty is in the public interest. Such evidence may relate to the extent of such person’s ability to continue in business and the collectability of a penalty, taking into account any other claims of the United States or third parties upon such person’s assets and the amount of such person’s assets.
(e)Authority to enter order requiring accounting and disgorgement
In any proceeding in which the Commission or the appropriate regulatory agency may impose a penalty under this section, the Commission or the appropriate regulatory agency may enter an order requiring accounting and disgorgement, including reasonable interest. The Commission is authorized to adopt rules, regulations, and orders concerning payments to investors, rates of interest, periods of accrual, and such other matters as it deems appropriate to implement this subsection.
(f)Security-based swaps
(1)Clearing agency
Any clearing agency that knowingly or recklessly evades or participates in or facilitates an evasion of the requirements of section 78c–3 of this title shall be liable for a civil money penalty in twice the amount otherwise available for a violation of section 78c–3 of this title.
(2)Security-based swap dealer or major security-based swap participant
Any security-based swap dealer or major security-based swap participant that knowingly or recklessly evades or participates in or facilitates an evasion of the requirements of section 78c–3 of this title shall be liable for a civil money penalty in twice the amount otherwise available for a violation of section 78c–3 of this title.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
References in Text
The Securities Act of 1933, referred to in subsec. (a)(1)(A), is act May 27, 1933, ch. 38, title I, 48 Stat. 74, which is classified generally to subchapter I (§ 77a et seq.) of chapter 2A of this title. For complete classification of this Act to the Code, see section 77a of this title and Tables. The Investment Company Act of 1940, referred to in subsec. (a)(1)(A), is title I of act Aug. 22, 1940, ch. 686, 54 Stat. 789, which is classified generally to subchapter I (§ 80a–1 et seq.) of chapter 2D of this title. For complete classification of this Act to the Code, see section 80a–51 of this title and Tables. The Investment Advisers Act of 1940, referred to in subsec. (a)(1)(A), is title II of act Aug. 22, 1940, ch. 686, 54 Stat. 847, which is classified generally to subchapter II (§ 80b–1 et seq.) of chapter 2D of this title. For complete classification of this Act to the Code, see section 80b–20 of this title and Tables. This chapter, referred to in subsec. (a)(1)(A), (C), (2), was in the original “this title”. See
References in Text
note set out under section 78a of this title.
Amendments
2010—Subsec. (a). Pub. L. 111–203, § 929P(a)(2), designated existing provisions as par. (1) and inserted heading, inserted “that such penalty is in the public interest and” before “that such person—” in introductory provisions, redesignated former pars. (1) to (4) as subpars. (A) to (D), respectively, of par. (1) and realigned margins, struck out concluding provisions which read “and that such penalty is in the public interest.”, and added par. (2). Subsec. (f). Pub. L. 111–203, § 773, added subsec. (f). 2006—Subsec. (a). Pub. L. 109–291 inserted “78o–7,” after “78o–5,” in introductory provisions. 2002—Subsec. (a). Pub. L. 107–204 inserted “78o–6,” before “78o–4,” in introductory provisions.
Statutory Notes and Related Subsidiaries
Effective Date
of 2010 AmendmentAmendment by section 929P(a)(2) of Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an
Effective Date
note under section 5301 of Title 12, Banks and Banking. Amendment by section 773 of Pub. L. 111–203 effective on the later of 360 days after July 21, 2010, or, to the extent a provision of subtitle B (§§ 761–774) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle B, see section 774 of Pub. L. 111–203, set out as a note under section 77b of this title.
Effective Date
Section effective Oct. 15, 1990, with provisions relating to civil penalties and accounting and disgorgement, see section 1(c)(1), (2) of Pub. L. 101–429, set out in an
Effective Date
of 1990 Amendment note under section 77g of this title.
Reference
Citations & Metadata
Citation
15 U.S.C. § 78u–2
Title 15, Commerce and Trade
Last Updated
Sep 23, 2026
Release point: 119-110