(a) Authority to impose civil penalties.
(1) Whenever it shall appear to the Commission
that any person has violated any provision of this title or the rules
or regulations thereunder by purchasing or selling a security or security-based
swap agreement while in possession of material, nonpublic information
in, or has violated any such provision by communicating such information
in connection with, a transaction on or through the facilities of
a national securities exchange or from or through a broker or dealer,
and which is not part of a public offering by an issuer of securities
other than standardized options or security futures products, the
Commission—
(A) may bring an action in a United
States district court to seek, and the court shall have jurisdiction
to impose, a civil penalty to be paid by the person who committed
such violation; and
(B) may, subject to subsection (b)(1), bring an action in a United
States district court to seek, and the court shall have jurisdiction
to impose, a civil penalty to be paid by a person who, at the time
of the violation, directly or indirectly controlled the person who
committed such violation.
5-224.71
(2) The amount of the penalty which may
be imposed on the person who committed such violation shall be determined
by the court in light of the facts and circumstances, but shall not
exceed three times the profit gained or loss avoided as a result of such
unlawful purchase, sale, or communication.
(3) The amount of the penalty which may
be imposed on any person who, at the time of the violation, directly
or indirectly controlled the person who committed such violation,
shall be determined by the court in light of the facts and circumstances,
but shall not exceed the greater of $1,000,000, or three times the
amount of the profit gained or loss avoided as a result of such controlled
person’s violation. If such controlled person’s violation
was a violation by communication, the profit gained or loss avoided
as a result of the violation shall, for purposes of this paragraph
only, be deemed to be limited to the profit gained or loss avoided
by the person or persons to whom the controlled person directed such
communication.
5-224.72
(b) Limitations on liability.
(1) No controlling person shall be subject
to a penalty under subsection (a)(1)(B) unless the Commission establishes
that—
(A) such controlling person knew or
recklessly disregarded the fact that such controlled person was likely
to engage in the act or acts constituting the violation and failed
to take appropriate steps to prevent such act or acts before they
occurred; or
(B)
such controlling person knowingly or recklessly failed to establish,
maintain, or enforce any policy or procedure required under section
15(f) of this title or section 204A of the Investment Advisers Act
of 1940 and such failure substantially contributed to or permitted
the occurrence of the act or acts constituting the violation.
(2) No person shall be
subject to a penalty under subsection (a) solely by reason of
employing another person who is subject to a penalty under such subsection,
unless such employing person is liable as a controlling person under
paragraph (1) of this subsection. Section 20(a) of this title shall
not apply to actions under subsection (a) of this section.
5-224.73
(c) Authority of Commission. The Commission, by such rules, regulations, and orders as it considers
necessary or appropriate in the public interest or for the protection
of investors, may exempt, in whole or in part, either unconditionally
or upon specific terms and conditions, any person or transaction or
class of persons or transactions from this section.
(d) Procedures for collection.
(1) A penalty imposed under this section
shall be payable into the Treasury of the United States, except as
otherwise provided in section 308 of the Sarbanes-Oxley Act of 2002
and section 21F of this title.
(2) If a person upon whom such a penalty
is imposed shall fail to pay such penalty within the time prescribed
in the court’s order, the Commission may refer the matter to
the Attorney General who shall recover such penalty by action in the
appropriate United States district court.
(3) The actions authorized by this section
may be brought in addition to any other actions that the Commission
or the Attorney General are entitled to bring.
(4) For purposes of section 27 of this
title, actions under this section shall be actions to enforce a liability
or a duty created by this title.
(5) No action may be brought under this
section more than 5 years after the date of the purchase or sale.
This section shall not be construed to bar or limit in any manner
any action by the Commission or the Attorney General under any other
provision of this title, nor shall it bar or limit in any manner any
action to recover penalties, or to seek any other order regarding
penalties, imposed in an action commenced within 5 years of such transaction.
5-224.74
(e) Definition. For
purposes of this section, “profit gained or loss avoided”
is the difference between the purchase or sale price of the security
and the value of that security as measured by the trading price of
the security a reasonable period after public dissemination of the
nonpublic information.
(f) The authority of the
Commission under this section with respect to security-based swap
agreements shall be subject to the restrictions and limitations of
section 3A(b) of this title.
(g) Duty of members and employees of Congress.
(1) In general. Subject to the rule of construction under section
10 of the STOCK Act and solely for purposes of the insider trading
prohibitions arising under this Act, including section 10(b) and Rule
10b-5 thereunder, each Member of Congress or employee of Congress
owes a duty arising from a relationship of trust and confidence to
the Congress, the United States Government, and the citizens of the
United States with respect to material, nonpublic information derived
from such person’s position as a Member of Congress or employee
of Congress or gained from the performance of such person’s
official responsibilities.
(2) Definitions. In this subsection—
(A) the term “Member of Congress” means a member of the
Senate or House of Representatives, a Delegate to the House of Representatives,
and the Resident Commissioner from Puerto Rico; and
(B) the term “employee of Congress”
means—
(i) any individual (other than a Member of
Congress), whose compensation is disbursed by the Secretary of the
Senate or the Chief Administrative Officer of the House of Representatives;
and
(ii) any other officer
or employee of the legislative branch (as defined in section 13101(11)
of title 5, United States Code).
(3) Rule of construction. Nothing in this subsection shall be construed
to impair or limit the construction of the existing antifraud provisions
of the securities laws or the authority of the Commission under those
provisions.
(h) Duty of other federal officials.
(1) In general. Subject to the rule of construction under section 10 of the STOCK
Act and solely for purposes of the insider trading prohibitions arising
under this Act, including section 10(b), and Rule 10b-5 thereunder,
each executive branch employee, each judicial officer, and each judicial
employee owes a duty arising from a relationship of trust and confidence
to the United States Government and the citizens of the United States
with respect to material, nonpublic information derived from such
person’s position as an executive branch employee, judicial
officer, or judicial employee or gained from the performance of such
person’s official responsibilities.
(2) Definitions. In this subsection—
(A) the term “executive branch
employee”—
(i) has the meaning given the term “employee”
under section 2105 of title 5, United States Code;
(ii) includes—
(I) the President;
(II) the Vice President; and
(III) an employee of the United
States Postal Service or the Postal Regulatory Commission;
(B)
the term “judicial employee” has the meaning given that
term in section 13101(9) of title 5, United States Code; and
(C) the term “judicial
officer” has the meaning given that term under section 13101(10)
of title 5, United States Code.
(3) Rule of construction. Nothing in this subsection shall be construed to impair or limit
the construction of the existing antifraud provisions of the securities
laws or the authority of the Commission under those provisions.
(i) Participation
in initial public offerings. An individual described in section
13103(f) of title 5, United States Code, may not purchase securities
that are the subject of an initial public offering (within the meaning
given such term in section 12(f)(1)(G)(i)) in any manner other than
is available to members of the public generally.
[15 USC 78u-1. As added
by act of Nov. 19, 1988 (102 Stat. 4677) and amended by acts of Dec.
21, 2000 (114 Stat. 2763A-426, 456, 457); July 30, 2002 (116 Stat.
785); July 21, 2010 (124 Stat. 1761); April 4, 2012 (126 Stat. 292,
297, 300); and Dec. 27, 2022 (136 Stat. 4357).]
