PRIA, Government Policy, Made Personal

Summary

The Commission can hold a hearing and order anyone who is breaking or about to break the securities laws to stop. It can make them fix the problem and follow rules for a time the Commission sets. The hearing date must be set at least 30 days and no more than 60 days after the person is served, unless the person agrees to another date. If the Commission believes a violation could cause big loss of assets, serious harm to investors, or hurt the public interest, it can issue a temporary stop order to prevent the harm while the case continues. That temporary order takes effect when it is served and stays in force unless the Commission or a court changes it. Temporary orders like this apply only to brokers, dealers, investment advisers and similar financial professionals or their associates. In investigations of public companies, the Commission can ask a court to have extraordinary payments put into an interest-bearing account for 45 days (extendable one time for up to 45 more days, but not beyond 90 days total); if charges are filed before the period ends, the hold can stay in place during the proceedings, but if no charges are filed the money is returned with interest. A person served with a temporary order can ask the Commission to set it aside, limit it, or suspend it. If the order was issued without a prior Commission hearing, that person may request a hearing within 10 days and the Commission must decide as soon as possible. Starting a review does not automatically stop the order unless a court says so. The Commission can also order people to return money with interest and can bar people who broke insider-trading rules from being officers or directors of public companies.

Title 15, §78u–3

Commerce and Trade, Source: USLM XML via OLRC

(a)If the Commission finds, after notice and opportunity for hearing, that any person is violating, has violated, or is about to violate any provision of this chapter, or any rule or regulation thereunder, the Commission may publish its findings and enter an order requiring such person, and any other person that is, was, or would be a cause of the violation, due to an act or omission the person knew or should have known would contribute to such violation, to cease and desist from committing or causing such violation and any future violation of the same provision, rule, or regulation. Such order may, in addition to requiring a person to cease and desist from committing or causing a violation, require such person to comply, or to take steps to effect compliance, with such provision, rule, or regulation, upon such terms and conditions and within such time as the Commission may specify in such order. Any such order may, as the Commission deems appropriate, require future compliance or steps to effect future compliance, either permanently or for such period of time as the Commission may specify, with such provision, rule, or regulation with respect to any security, any issuer, or any other person.

(b)The notice instituting proceedings pursuant to subsection (a) shall fix a hearing date not earlier than 30 days nor later than 60 days after service of the notice unless an earlier or a later date is set by the Commission with the consent of any respondent so served.

(c)(1)Whenever the Commission determines that the alleged violation or threatened violation specified in the notice instituting proceedings pursuant to subsection (a), or the continuation thereof, is likely to result in significant dissipation or conversion of assets, significant harm to investors, or substantial harm to the public interest, including, but not limited to, losses to the Securities Investor Protection Corporation, prior to the completion of the proceedings, the Commission may enter a temporary order requiring the respondent to cease and desist from the violation or threatened violation and to take such action to prevent the violation or threatened violation and to prevent dissipation or conversion of assets, significant harm to investors, or substantial harm to the public interest as the Commission deems appropriate pending completion of such proceedings. Such an order shall be entered only after notice and opportunity for a hearing, unless the Commission determines that notice and hearing prior to entry would be impracticable or contrary to the public interest. A temporary order shall become effective upon service upon the respondent and, unless set aside, limited, or suspended by the Commission or a court of competent jurisdiction, shall remain effective and enforceable pending the completion of the proceedings.

(2)Paragraph (1) shall apply only to a respondent that acts, or, at the time of the alleged misconduct acted, as a broker, dealer, investment adviser, investment company, municipal securities dealer, government securities broker, government securities dealer, registered public accounting firm (as defined in section 7201 of this title), or transfer agent, or is, or was at the time of the alleged misconduct, an associated person of, or a person seeking to become associated with, any of the foregoing.

(3)(A)(i)Whenever, during the course of a lawful investigation involving possible violations of the Federal securities laws by an issuer of publicly traded securities or any of its directors, officers, partners, controlling persons, agents, or employees, it shall appear to the Commission that it is likely that the issuer will make extraordinary payments (whether compensation or otherwise) to any of the foregoing persons, the Commission may petition a Federal district court for a temporary order requiring the issuer to escrow, subject to court supervision, those payments in an interest-bearing account for 45 days.

(ii)A temporary order shall be entered under clause (i), only after notice and opportunity for a hearing, unless the court determines that notice and hearing prior to entry of the order would be impracticable or contrary to the public interest.

(iii)A temporary order issued under clause (i) shall—

(I)become effective immediately;

(II)be served upon the parties subject to it; and

(III)unless set aside, limited or suspended by a court of competent jurisdiction, shall remain effective and enforceable for 45 days.

(iv)The effective period of an order under this subparagraph may be extended by the court upon good cause shown for not longer than 45 additional days, provided that the combined period of the order shall not exceed 90 days.

(B)(i)If the issuer or other person described in subparagraph (A) is charged with any violation of the Federal securities laws before the expiration of the effective period of a temporary order under subparagraph (A) (including any applicable extension period), the order shall remain in effect, subject to court approval, until the conclusion of any legal proceedings related thereto, and the affected issuer or other person, shall have the right to petition the court for review of the order.

(ii)If the issuer or other person described in subparagraph (A) is not charged with any violation of the Federal securities laws before the expiration of the effective period of a temporary order under subparagraph (A) (including any applicable extension period), the escrow shall terminate at the expiration of the 45-day effective period (or the expiration of any extension period, as applicable), and the disputed payments (with accrued interest) shall be returned to the issuer or other affected person.

(d)(1)At any time after the respondent has been served with a temporary cease-and-desist order pursuant to subsection (c), the respondent may apply to the Commission to have the order set aside, limited, or suspended. If the respondent has been served with a temporary cease-and-desist order entered without a prior Commission hearing, the respondent may, within 10 days after the date on which the order was served, request a hearing on such application and the Commission shall hold a hearing and render a decision on such application at the earliest possible time.

(2)Within—

(A)10 days after the date the respondent was served with a temporary cease-and-desist order entered with a prior Commission hearing, or

(B)10 days after the Commission renders a decision on an application and hearing under paragraph (1), with respect to any temporary cease-and-desist order entered without a prior Commission hearing,

(3)The commencement of proceedings under paragraph (2) of this subsection shall not, unless specifically ordered by the court, operate as a stay of the Commission’s order.

(4)section 78y of this title shall not apply to a temporary order entered pursuant to this section.

(e)In any cease-and-desist proceeding under subsection (a), the Commission 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)In any cease-and-desist proceeding under subsection (a), the Commission may issue an order to prohibit, conditionally or unconditionally, and permanently or for such period of time as it shall determine, any person who has violated section 78j(b) of this title or the rules or regulations thereunder, from acting as an officer or director of any issuer that has a class of securities registered pursuant to section 78l of this title, or that is required to file reports pursuant to section 78o(d) of this title, if the conduct of that person demonstrates unfitness to serve as an officer or director of any such issuer.

Notes & Related Subsidiaries

Editorial Notes

References in Text

This chapter, referred to in subsec. (a), was in the original “this title”. See

References in Text

note set out under section 78a of this title. section 7201 of this title, referred to in subsec. (c)(2), was in the original “section 2 of the Sarbanes-Oxley Act of 2002”, Pub. L. 107–204, which enacted section 7201 of this title and amended section 78c of this title.

Amendments

2010—Subsec. (c)(2). Pub. L. 111–203 substituted “Paragraph (1)” for “paragraph (1) subsection”. 2002—Subsec. (c)(2). Pub. L. 107–204, § 1103(b), substituted “paragraph (1)” for “This”. Pub. L. 107–204, § 3(b)(3), inserted “registered public accounting firm (as defined in section 7201 of this title),” after “government securities dealer,”. Subsec. (c)(3). Pub. L. 107–204, § 1103(a), added par. (3). Subsec. (f). Pub. L. 107–204, § 1105(a), added subsec. (f).

Statutory Notes and Related Subsidiaries

Effective Date

of 2010 AmendmentAmendment by 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.

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.

§78u–3 Cease-and-desist Proceedings

Summary

Title 15, §78u–3

Notes & Related Subsidiaries

Editorial Notes

References in Text

References in Text

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Effective Date

Effective Date

Citations & Metadata