sec fines

SEC May Pack More Heat Soon

A bipartisan effort in Congress is underway to give the SEC more sting when it comes to securities law violators. All we can say is: it's about time! Lawmakers are pushing hard to increase the limits of the fines the SEC is allowed to slap broker dealers and brokerages with to up to $1 million per violation for individual brokers and up to $10 million per offense for firms. Basically, the bill's backers in Congress want the SEC to be able to inflict enough financial pain on brokerages to change the culture. Right now, most firms tend to view the SEC fines as a nuisance--the cost of doing business. If, however, the bill that was written by Senator Jack Reed, a Democrat from Rhode Island and Chairman of the Senate Banking Subcommittee on Securities, Insurance and Investment; and Senator Charles Grassley, a Republican from Iowa and ranking member of the Senate Judiciary Committee gets passed in Congress, the SEC will be getting some serious new regulatory firepower.

Ultimately, what lawmakers hope is that steeper penalties and more pain will result in fewer repeat offenders along with heightened self-regulation on the part of brokerages, who will be forced to beef up or wake up their compliance departments and come down much harder on rogue brokers. Under the new law, not only would broker dealers be more likely to increase vigilance around compliance issues, they would also be much less tolerant of individual broker misconduct. Since heftier fines means broker dealers are more exposed by any bad brokers they sponsor, they'd be foolish not to crack down on rule breakers and/or terminate those who cannot toe the regulatory line. 

Some critics of the bill say that rather than raising its punitive powers lawmakers should be looking to strengthen the SEC's enforcement abilities by granting the commission more funding for personnel and financial expertise. But just last year, the SEC set a record for enforcement actions and fines. Still others say the SEC is most effective on moral terms: they insist that suffering an SEC action is usually a career-ending event. Still, the larger fines written into the bill seem directed more at the brokerages than the individual brokers. By setting their sights on crooked firms, lawmakers have made it clear they want not just to punish offenders and inflict pain, but instigate real change.

It's hard to predict how far the bill will get in Congress before the current session ends in December. But we at The Green Firm hope change comes sooner rather than later.

As always, if you or anyone you know has been the victim of broker misconduct, please contact us for a free consultation.