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Taking a No-Nonsense Approach to Enforcing the Federal Securities Laws

Commissioner Luis Aguilar

U.S. Securities and Exchange Commission

Securities Enforcement Forum 2012, Mayflower Hotel, Washington, D.C.

Oct. 18, 2012

Good morning. I would like to thank Bruce Carton for inviting me to participate in the inaugural 2012 Securities Enforcement Forum. I am delighted to be here with a group of people who care about the SEC as an institution and desire for it to carry out its mission. Before I begin, let me start by issuing the standard disclaimer that the views I express today are my own, and do not necessarily reflect the views of the Securities and Exchange Commission, my fellow Commissioners, or members of the staff.

Today I would like to begin with a few words about how trust is the foundation of the capital markets, and some of the ways in which the financial crisis may have damaged that trust. I will then discuss how robust enforcement of the federal securities laws is a key component to rebuilding that trust.

Robert Mueller, Director of the Federal Bureau of Investigations, recently spoke about the dangers of securities fraud to investors and to our markets. Director Mueller stated that securities fraud "poses a great challenge, because our free market economy and, indeed, our whole way of life, are built on trust – trust in the markets, and trust in our fellow citizens. Financial fraud undermines that trust, with severe consequences: consequences such as wasted taxpayer dollars, higher insurance premiums, and increased business costs – to say nothing of the harm to the victims themselves."1 I agree with Director Mueller.

I am concerned about several recent reports that, taken together, indicate that investors are stating that they have little or no trust in our markets. For example, here is a compilation of the findings:

  • 79% of investors have no trust in the financial system;2
  • 52% of investors have no confidence in the management of public companies;3
  • 54% of investors have no confidence in the boards of directors of public companies;4
  • 64% of Americans believe that corporate misconduct was a significant factor in bringing about the current economic crisis;5 and
  • 61% of investors have no confidence in government regulators.6

The fact that more than half of investors have no confidence in government regulators is an astonishing figure; but, sadly, it is not surprising given the events that have occurred over the past few years. According to a recent study, the near-collapse of the financial system and the resulting economic crisis caused an estimated $12.8 trillion in losses for investors.7

So what brought about this crisis? As Senator Carl Levin has stated, "the financial crisis was not an act of nature, it was a man-made economic assault that cost millions of jobs, evaporated billions of dollars in retirement savings, and put our nation in the worst economic tailspin since the Great Depression."8

As many have observed, too many financial institutions borrowed to the hilt in the years leading up to the crisis, leaving them vulnerable to financial distress or ruin if the value of their investments declined even modestly.9 For example, as of 2007, the five major investment banks – Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley – were operating with extraordinarily thin capital.10 By one measure, their leverage ratios were as high as 40 to 1.11 Less than a 3% drop in asset values could have wiped out a firm.12 To make matters worse, much of the leverage was often hidden – in derivatives positions, in off-balance-sheet entities, and through the use of "window dressing" in financial reports.13

As Secretary Geithner has stated, the financial crisis was also impacted by a "large shadow banking system which developed without meaningful regulation, using trillions of dollars in short-term debt to fund inherently risky financial activity."14

To the list of factors contributing to the financial crisis, you can also add dramatic breakdowns in corporate governance, profound lapses in regulatory oversight, and outright misconduct.15 Clearly, there were many instances of misconduct in the years leading up to and during the financial crisis. These instances included some of the more venerable names in the financial industry. For example, Citigroup, Goldman Sachs, and J.P. Morgan, were each charged with concealing from investors material information in selling collateralized debt obligations ("CDOs") and other complex structured products.16

Still, nearly five years after the crisis, the public still asks why more individuals and entities have not been held accountable.17 The public must have faith that the SEC and other institutions are aggressively working to protect the integrity of the securities market. And, for that faith to return, the SEC must be pro-active in demonstrating that it is pro-investor.

While any pro-investor reform seems to be an increasingly uphill battle, one of the initiatives that has actually been implemented and is working on behalf of investors, is the SEC's Whistleblower program. Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") mandated that the SEC establish a Whistleblower program to make significant monetary rewards to eligible individuals who voluntarily provide original information that leads to successful Commission enforcement actions. The program has been in place for a little over a year and recently made its first award.

In my job, I hear a great deal of hyperbole. As we considered the contours of the rules to implement the Whistleblower program, we heard repeatedly that the implementation of this program would overwhelm the Commission and literally shut our program down. We also heard that corporate compliance departments that had been built out as a result of Sarbanes-Oxley, would no longer be able to function.

I'm happy to report that we have not shut down. In fact, we have not even come close. The SEC receives an average of eight tips a day rather than the avalanche of poor quality, frivolous tips that were predicted. We have received a total of 2,820 tips as of August 8, 2012. Interestingly, the volume has been steady without significant fluctuations. Tips have been received from individuals across the United States and from at least 45 foreign countries.

Our staff is reporting that they see a noticeable difference in the quality of the information that they are receiving. This is critical. The quality of the information determines how quickly our staff can act, whether we can increase our odds to capture the true masterminds, and whether we can prevent greater harm from occurring. I am proud of the work of the Commission and our staff and I look forward to investors reaping the benefits.

As a vocal advocate for empowering the SEC's Enforcement program, I believe there is much more that the SEC can do to prove that robust enforcement is the norm and investors and fraudsters should take notice. I would like to focus the remainder of my comments on how our Enforcement program can do more to prosecute violators of the securities laws and help restore public trust in the capital markets.

I believe that an effective Enforcement program must, among other things:

  • Focus on individual accountability for misconduct;
  • Have a maximum deterrence strategy that focuses on using available sanctions to effectively deter and punish misconduct; and
  • Pay particular attention to recidivists to protect against further misconduct.

Individual Accountability

The lack of individual accountability for misconduct during the financial crisis has generated a significant amount of public concern, and understandably so.18 Senator Ted Kaufman expressed his frustration with the lack of individual accountability for misconduct during the financial crisis when he stated that "we have seen very little in the way of senior officer- or boardroom-level prosecutions of people on Wall Street who brought this country to the brink of financial ruin."19 In fact, a recent survey found that 81% of Americans do not believe the government has done enough to stop corporate wrongdoing.20

Yet, the facts show that the SEC has brought actions against 115 individuals and entities, naming 57 CEOs, CFOs, and other senior corporate officers for misconduct related to the financial crisis.21

Clearly the above statistics do not tell the whole story.22 An important question to consider in evaluating the efficacy of our Enforcement program is whether or not we are, as Stanley Sporkin once described, "getting in the first strike."23 Are we creatively and aggressively looking for ways to hold every responsible individual, regardless of title, accountable for violations of the federal securities laws in an entity? And more importantly, is the SEC sending the wrong message in those cases when it charges an entity with wrongdoing without charging an individual for misconduct? The fact remains that corporations and other business are led by men and women, who are ultimately responsible for their actions. When an entity is charged with a violation of the federal securities laws, it is clear that there are human beings who are responsible for the misconduct.

The investing public has a right to expect that government regulators will continue to hold accountable those individuals responsible for misconduct – and that includes those culpable at the top, not just the flunkies below.24

It is important that all enforcement investigations continue to recognize that the tone in any organization is set at the top, and that all enforcement investigations should have a laser-like-focus on any potential misconduct by senior officials at any entity.

Maximum Deterrence Requires the Effective Use of All Available Remedies

Beyond focusing on individuals, and holding them responsible for their misconduct, it is important that sanctions have a real deterrent effect. Studies have shown that the success of any deterrence strategy turns on the severity of sanctions, the degree of certainty that sanctions will be imposed, and the amount of time that lapse between the unlawful conduct and when the sanctions are imposed, and the extent of any extralegal consequences.25

The SEC has a variety of remedies to address violations of the federal securities laws, including injunctions, cease-and-desist orders, disgorgement, penalties, and collateral industry bars, but today, there are three sanctions that I want to particularly highlight. First, is the use of permanent officer and director bars, second is the issuance of collateral industry bars, and third is the need for meaningful monetary penalties.

Permanent Officer and Director Bars and Collateral Industry Bars

Bars are an invaluable tool. One of the most important things that the SEC can do to proactively protect investors and the market is to make sure that bad actors are prevented from doing future harm.

During my four years as a Commissioner, I've noticed how hard defendants fight to avoid officer and director bars. It is one of the sanctions that they fear the most, which is what precisely makes it one of the most effective sanctions available. For that deterrence to exist, potential fraudsters need to know the Commission is willing to impose this sanction.

In terms of general deterrence, the officer and director bar is one of the most effective enforcement mechanisms at the SEC's disposal.26 To a corporate executive, a bar order may be more devastating than a monetary fine.27 Indeed, it is intended to be: In the case of senior executives and other highly-compensated persons, a defendant may very likely view a fine as an inconsequential cost of doing business.28 For those defendants, the officer and director bar is a strong sanction that may have substantially greater economic and even other consequences, by requiring a significant change in the individual's career. The legislative history of officer and director bars makes clear that Congress's intent with the officer and director bar was to deter corporate misconduct and to send a signal to investors that the markets will be safe from the actions of violators of the federal securities laws.29

Similarly, another powerful deterrent is a collateral industry bar. The importance of collateral industry bars to protect investors is highlighted by the passage of Section 925 of the Dodd-Frank Act. Section 925 now authorizes the SEC to obtain collateral bars. Accordingly, the Commission can now impose suspensions or bars from association with brokers, dealers, municipal securities dealers, municipal advisors, transfer agents, or nationally recognized statistical rating organizations. Thus, if a bad actor violates the federal securities laws, the Commission can bar that actor across the board from the regulated securities industry.

This is an important development to prevent fraudsters from migrating from one segment of the financial industry to another to inflict greater harm. The legislative intent of Section 925 is clear, and this should be a standard aspect of SEC settlements and other actions.

Monitoring Recidivists

During my tenure at the Commission I have also noticed that recidivism is an issue at the SEC. Many offenders, particularly Ponzi scheme offenders, have long track records of similar fraud schemes.30 That tells me that the first time that many of these defendants were prosecuted, the remedies and penalties did not effectively deter them from engaging in egregious fraud again. We need to re-evaluate the strength of our initial settlements and specifically design a program to combat recidivism.

Since the vast majority of the Commission's civil enforcement actions result in settlement, one idea would be that the Commission should insist that every recidivist be subject to more robust sanctions, including potential post-sanction monitoring. For example, the Commission could consider instituting post-sanction monitoring for individuals that engage in egregious misconduct and/or commit a violation on multiple occasions. Post-sanction monitoring might include unscheduled office visits; access to phone records, bank records, and state and federal income tax returns; and submission of periodic self-reports by the defendant.31

While this type of program admittedly entails ongoing costs, a limited and targeted monitoring regime on the most dangerous recidivists would provide effective deterrence to defendants who would now be put on notice of the Commission's continuing interest their activities.32 Monitoring recidivists also offers the possibility of early intervention in the form of an asset freeze or contempt of court proceeding when new misconduct is discovered, saving more investors from being harmed by the same defendant.

Monetary Penalties

Another important tool for the SEC involves monetary penalties.33 As this audience knows, the federal securities laws authorize the Commission to obtain monetary penalties in both administrative proceedings and federal court actions. Currently, the law provides two methods for calculating the maximum amount of penalties. The first method, which is applicable in both federal civil cases and administrative actions, allows a per violation calculation, the amount of which increases by tier based on the seriousness of the misconduct. The highest tier available for violations is capped by law at $150,000 per violation for individuals and $725,000 per violation for entities. The second calculation method, generally available only in federal court, allows the imposition of a penalty equal to the "gross amount of the pecuniary gain" to the defendant "as a result of the violation."34

During the financial crisis, there were a number of instances in which fraudulent misrepresentation of a public company's financial condition resulted in a relatively small pecuniary gain to the company itself or to the corporate managers who committed the fraud.35 However, such frauds often result in enormous losses to investors. As a result, the maximum penalty available to the Commission may not reflect the seriousness of the violation or the harmful impact on victims.

For example, in SEC v. Citigroup Global Capital Markets, Inc., investors lost almost $700 million, but the maximum penalty the SEC could have obtained was $160 million, and in fact, the SEC settled to only a $95 million penalty.36 The settled penalty amount was a tiny fraction of the $11.3 billion in profits Citigroup earned in the year 2011,37 and less than 13.6% of the harm suffered by investors.

I agree with Senator Grassley when he stated that "[i]f a fine is just decimal dust for an [entity], that's not a deterrent."38 I also agree with President Obama when he stated that "too often, we've seen Wall Street firms violating major antifraud laws because the penalties are too weak and there's no price for being a repeat offender."39

To address the Commission's need to provide sufficient financial deterrence against misconduct, on July 23, 2012 the Stronger Enforcement of Civil Penalties Act of 2012 (the "SEC Penalties Act") was introduced by Senators Reed and Grassley.40 The introduction of the SEC Penalties Act was a bi-partisan acknowledgement of the concern that previous penalties issued by the Commission in a number of enforcement actions were not adequate.

The SEC Penalties Act would increase the per-offense financial penalty cap for the most serious securities laws violations to $1 million per violation for individuals, and $10 million per violation for firms. More importantly, the SEC Penalties Act would authorize the SEC to issue penalties for each violation up to the greater of (i) $1 million for individuals or $10 million for entities, (ii) three times the gross pecuniary gain, or (iii) the losses incurred by investors as a result of the violation.41

Moreover, as to recidivists, the SEC Penalties Act would triple the penalty cap for recidivists who have been found to violate the federal securities laws or subject to SEC administrative relief within the past five years.42 This provision would send a loud and clear message that recidivism is unacceptable and that the financial consequences for recidivism may be severe.

I urge Congress to pass the SEC Penalties Act.43 The bill will provide the SEC with more tools to demand meaningful accountability from individuals and entities involved in misconduct.

The power to impose higher penalties will enhance the effectiveness of the Commission's Enforcement program by more effectively deterring individual and corporate violators. Enhanced penalties will also allow the Commission to better structure its settlements to compensate investors for actual harm suffered, match the penalty amount to the severity of the alleged violation, and enhance its bargaining power in settlement negotiations.44

Importantly, however, even if the Commission's ability to impose penalties is enhanced, the Commission will still need to be ready, willing, and able to impose meaningful penalties.

Self-Funding for the SEC

I also recognize that effective investor protection requires a well-armed Enforcement program. It is common knowledge that the Commission's resources are limited, and that our resources have completely failed to keep up with the growth into the markets we oversee – both in terms of sheer size and of complexity. In the past I have been a vocal advocate for SEC self-funding, and I continue to be an advocate today. The SEC's staff must have the resources to adequately police the marketplace and to fulfill its mission to protect investors.


Robust, proactive, and strong enforcement by the SEC is crucial to the protection of investors and the economic growth of our country. I know that the SEC staff shares my aspirations to establish market integrity and re-build the trust of investors. I haven't met a group of people who are more dedicated, committed, and hard-working than the staff at the SEC. I look forward to continuing to work by their side.

Thank you for having me here today.

1 "FBI Director Spotlights Fraud in South Florida," Paul Brinkmann, South Florida Business Journal (April 4, 2012), available at

2 "Too Big To Trust," Chicago Booth/Kellogg Financial Trust Index (July 2012), available at (The Financial Trust Index measures investors' trust in the stock market, banks, mutual funds and large corporations. Banks include national banks, local banks, and credit unions.)

3 "The CAQ's Sixth Annual Main Street Investor Survey" (September 2012), available at

4 Id.

5 "The 2012 Ethics and Action Survey: Voices Carry" (September 2012), available at

6 Supra note 3.

7 "The Cost of the Crisis Caused by Wall Street = No Less Than 12.8 Trillion Dollars. Better Markets" (September 12, 2012), available at

8 "Wall Street and the Financial Crisis," U.S. Senator Carl Levin (D-Michigan) (2011), available at See also, "The Financial Crisis Inquiry Report" (January 2011), available at (According to the Financial Crisis Inquiry Commission, the financial crisis was "the result of human action and inaction, not of computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public.")

9 See "Sudden Stops, Financial Crises, and Leverage," Enrique G. Mendoza, American Economic Review 100 (December 2010); Testimony before the U.S. House of Representatives Subcommittee on Oversight and Investigations, Committee on Financial Services, by Orice Williams Brown, Director Financial Markets and Community Investment, United States Government Accountability Office (May 6, 2010), available at; and "The Financial Crisis Inquiry Report" (January 2011), available at

10 See The Financial Crisis Inquiry Report at xix (January 2011), available at

11 Id. at xix-xx. ("For example, at the end of 2007, Bear Stearns had $11.8 billion in equity and $383.6 billion in liabilities and was borrowing as much as $70 billion in the overnight market.")

12 Id.

13 Id.

14 "Financial Crisis Amnesia," Tim Geithner, The Wall Street Journal (March 1, 2012), available at ("The derivatives markets grew to more than $600 trillion, with little transparency or oversight.")

15 "Financial Leaders Go AWOL in the Meltdown," Ben W. Heineman Jr., (November 4, 2011), available at,%20Ben%20Heineman.pdf; "Toward a Public Enforcement Model for Directors' Duty of Oversight," Renee M. Jones and Michelle Welsh, Vanderbilt Journal of Transnational Law, Volume 45, Number 2 (March 2012), available at; and "America's Political Crisis: The Unsustainable State in a Time of Unraveling," Lawrence Jacobs and Desmond King, American Political Science Association (April 2009), available at

16 See, "Citigroup to Pay $285 Million to Settle SEC Charges for Misleading Investors About CDO Tied to Housing Market" (October 19, 2011) (Citigroup's principal U.S. broker-dealer subsidiary was charged with misleading investors about a $1 billion CDO tied to the housing market in which Citigroup bet against investors as the housing market showed signs of distress), available at ; "SEC Charges Goldman Sachs with Fraud in Structuring and Marketing of CDO Tied to Subprime Mortgages" (April 16, 2010) (Goldman Sachs was charged with defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter), available at; and "J.P. Morgan to Pay $153.6 Million to Settle SEC Charges of Misleading Investors in CDO Tied to U.S. Housing Market" (June 21, 2011) (JP Morgan was also charged with misleading investors in a complex mortgage securities transaction just as the housing market was starting to plummet), available at

17 See, "Moral Hazard and the Financial Crisis," Kevin Dowd, Cato Journal, Vol. 29. No. 1 (Winter 2009), available at; "Panel Seeks 'Accountability' In Financial Crisis," John Ydstie, NPR (January 13, 2010), available at; and "The Poor Level of Corporate as well as Individual Accountability Needs to be Addressed," T N Ninan, Business Standard (July 7, 2012), available at

18 "Justice Department drops Goldman financial crisis probe," David Ingram and Aruna Viswanatha, Reuters (August 9, 2012), available at; "Corporate Fraud Cases Often Spare Individuals," Michael S. Schmidt and Edward Wyatt, New York Times (August 7, 2012), available at; "In Financial Crisis, No Prosecutions of Top Figures," Gretchen Morgensen and Louise Story, New York Times (April 14, 2011), available at; and "Prosecuting Wall Street," CBS News-60 Minutes (December 4, 2011), available at

19 "Financial Crisis Prosecutions on Wall Street Slow to Develop Despite Cries for Justice," Shahien Nasiripour, Huffington Post (May 25, 2011), available at

20 Supra note 5.

21 "SEC Enforcement Actions Addressing Misconduct that Led to or Arose From the Financial Crisis," (October 1, 2012), available at; Testimony before the U.S. House of Representatives Committee on Financial Services, by Robert Khuzami, Director, Division of Enforcement, U.S. Securities and Exchange Commission (May 17, 2012), available at

22 "SEC Enforcement Story Doesn't Add Up for 2011," Joshua Gallu, Bloomberg (March 2, 2012), available at ("[M]ore than 230, or 31 percent, of the 735 matters [Division of Enforcement filed in fiscal year 2011] weren't new. They were so-called follow-administrative proceedings that institute penalties in cases that already had been brought, the examination by Bloomberg News Shows. Excluding those actions, such as barring people who've already been found guilty of fraud from working in the industry, the SEC filed 499 original cases last year, fewer than the 520 in 2009, the year before the reorganization.")

23 Supra note 19.

24 "No Crime, No Punishment," New York Times Editorial (August 25, 2012), available at; "Corporate Fraud Cases Often Spare Individuals," Michael S. Schmidt and Edward Wyatt, New York Times (August 7, 2012), available at;
"Justice Department drops Goldman financial crisis probe," David Ingram and Aruna Viswanatha, Reuters (August 9, 2012), available at; "Weighing SEC's Crackdown on Fraud," Jean Eaglesham, The Wall Street Journal (April 11, 2012), available at; and "No Top Figures Charged in Financial Crisis," Gretchen Morgenson and Louise Story, New York Times (November 11, 2011), available at

25 See, Raymond Paternoster, "How Much Do We Really Know About Criminal Deterrence?" The Journal of Criminal Law & Criminology, Northwestern University School of Law, Vol. 100, No. 3 (2010).

See, Jon Carlson, "Securities Fraud, Officer & Director Bars, and the Unfitness Inquiry after Sarbanes Oxley" Fordham Journal of Corporate and Financial Law, Volume 14, Issue 3 (May 2009).

27 See, Jayne W. Barnard, "When Is a Corporate Executive Substantially Unfit to Serve?" 70 N.C.L. Rev. 1489, 1522 (1992).

28 Id.

29 H.R. Rep. No. 101-616 at 27 (190), as reprinted in 1990 U.S.C.C.A.N. 1379, 1394.

40 See, Jayne W. Barnard, "Securities Fraud, Recidivism, and Deterrence" Penn State Law Review 189 (2008).

31 A limited and targeted post-sanction monitoring program may raise issues related to privacy concerns for defendants, costs for such a program, and the SEC's authority to conduct such a program.

32 Supra note 30. (While this type of program may raise privacy issues, a limited and targeted monitoring regime, on the most dangerous recidivists would be an effective method to chill recidivist behavior.)

33 See, S. Rep. No. 337, 101st Cong., 2d Sess. 1990 at 1. (It may come as a surprise to some, but prior to 1984, the entirety of the Commission's civil penalty authority was found in one narrow provision of the Exchange Act, which permitted the Commission to assess a penalty of $100 per day against issuers for failure to file certain statutorily required reports. Then the Insider Trading Sanctions Act of 1984 (ITSA) authorized the Commission to seek civil money penalties of up to three times the profit gained or loss avoided by a person who commits illegal insider trading. The ITSA legislative history reflected Congress's belief that civil penalties increases the deterrence of insider trading not only by making it financially painful for those who were caught, but by drawing attention to the Commission's insider trading actions, and thereby communicating more widely the risks associated with such misconduct. After several major Wall Street scandals, Congress expanded the Commission's penalty authority in 1990, with the enactment of the Securities Enforcement Remedies and Penny Stock Reform Act (the "Remedies Act"). With the Remedies Act, Congress granted the SEC the power to seek penalties for any violation of any of the major securities statues. Congress's intent was that the new civil penalties would "deter unlawful conduct by increasing the financial consequences of securities law violations.)

34 See, Securities Act of 1933 20(d)(2); Securities Exchange Act of 1934 21(d)(3)(B); Investment Company Act of 1940 42(e)((2); and Investment Advisers Act of 1940 209(e)(2).

35 "Citigroup to Pay $285 Million to Settle SEC Charges for Misleading Investors About CDO Tied to Housing Market" (October 19, 2011), available at; "SEC Charges Goldman Sachs with Fraud in Structuring and Marketing of CDO Tied to Subprime Mortgages" (April 16, 2010), available at; and "J.P. Morgan to Pay $153.6 Million to Settle SEC Charges of Misleading Investors in CDO Tied to U.S. Housing Market" (June 21, 2011), available at

36 See, "Should the SEC Have Power to Impose Higher Penalties?," Bruce Carton, Compliance Week (October 10, 2012), available at (The federal securities laws generally limit the disgorgement amount the SEC can recover from an entity to its ill-gotten gains, plus a penalty in an amount up to a defendant's gain. In this case, Citigroup had made $160 million in profits off of the questionable transactions which is much less than the amount investors lost due to Citigroup's conduct.)

37 "Citigroup Reports Fourth Quarter Net Income" (January 18, 2012), available at

38 "Senators: Let SEC Hit Wall Street Harder," MJ Lee, Politico (July 23, 2012), available at

39 "Remarks by the President on the Economy in Oswatomie, Kansas," The White House, Office of the Press Secretary (December 6, 2011), available at

40 S-3416 "Stronger Enforcement of Civil Penalties Act of 2012," available at

41 Id.

42 Supra note 40. (This would also include and other cases involving fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement that resulted in substantial losses to victims or substantial pecuniary gain to the violators.)

43 See, "Grassley, Reed Seek Tougher Penalties for Wall Street Fraud," Office of United States Senator Chuck Grassley of Iowa (July 23, 2012), available at (Some critics of the SEC Penalties Act have argued that increasing penalties would not improve deterrence or financial compliance. However, penalties must be modernized to reflect current financial realities. As Senator Reed noted "in order to protect taxpayers and investors, we need tougher anti-fraud laws and forceful oversight of Wall Street. Some of these institutions that are 'too big to fail' have also become 'too big to care.' If they look at the bottom line and see they can break the law, get caught, pay a nominal fine, and still profit, the cycle of misconduct will continue. The law needs to change to ensure the punishment fits the crime.")

44 Supra note 36.

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