(a) Authority and discretion of Commission to investigate violations.
(1) The Commission may, in
its discretion, make such investigations as it deems necessary to
determine whether any person has violated, is violating, or is about
to violate any provision of this title, the rules or regulations thereunder,
the rules of a national securities exchange or registered securities
association of which such person is a member or a person associated,
or, as to any act or practice, or omission to act, while associated
with a member, formerly associated with a member, the rules of a registered
clearing agency in which such person is a participant, or, as to any
act or practice, or omission to act, while a participant, was a participant,
the rules of the Public Company Accounting Oversight Board, of which
such person is a registered public accounting firm, a person associated
with such a firm, or, as to any act, practice, or omission to act,
while associated with such firm, a person formerly associated with
such a firm, or the rules of the Municipal Securities Rulemaking Board,
and may require or permit any person to file with it a statement in
writing, under oath or otherwise as the Commission shall determine,
as to all the facts and circumstances concerning the matter to be
investigated. The Commission is authorized in its discretion, to publish
information concerning any such violations, and to investigate any
facts, conditions, practices, or matters which it may deem necessary
or proper to aid in the enforcement of such provisions, in the prescribing
of rules and regulations under this title, or in securing information
to serve as a basis for recommending further legislation concerning
the matters to which this title relates.
(2) On request from a foreign securities
authority, the Commission may provide assistance in accordance with
this paragraph if the requesting authority states that the requesting
authority is conducting an investigation which it deems necessary
to determine whether any person has violated, is violating, or is
about to violate any laws or rules relating to securities matters
that the requesting authority administers or enforces. The Commission
may, in its discretion, conduct such investigation as the Commission
deems necessary to collect information and evidence pertinent to the
request for assistance. Such assistance may be provided without regard
to whether the facts stated in the request would also constitute a
violation of the laws of the United States. In deciding whether to
provide such assistance, the Commission shall consider whether (A)
the requesting authority has agreed to provide reciprocal assistance
in securities matters to the Commission; and (B) compliance with the
request would prejudice the public interest of the United States.
5-219
(b) Attendance of witnesses;
production of records. For the purpose of any such investigation,
or any other proceeding under this title, any member of the Commission
or any officer designated by it is empowered to administer oaths and
affirmations, subpena witnesses, compel their attendance, take evidence,
and require the production of any books, papers, correspondence, memoranda,
or other records which the Commission deems relevant or material to
the inquiry. Such attendance of witnesses and the production of any
such records may be required from any place in the United States or
any State at any designated place of hearing.
5-220
(c) Judicial enforcement of investigative power
of Commission; refusal to obey subpena; criminal sanctions. In
case of contumacy by, or refusal to obey a subpena issued to, any
person, the Commission may invoke the aid of any court of the United
States within the jurisdiction of which such investigation or proceeding
is carried on, or where such person resides or carries on business,
in requiring the attendance and testimony of witnesses and the production
of books, papers, correspondence, memoranda, and other records. And
such court may issue an order requiring such person to appear before
the Commission or member or officer designated by the Commission,
there to produce records, if so ordered, or to give testimony touching
the matter under investigation or in question; and any failure to
obey such order of the court may be punished by such court as a contempt
thereof. All process in any such case may be served in the judicial
district whereof such person is an inhabitant or wherever he may be
found. Any person who shall, without just cause, fail or refuse to
attend and testify or to answer any lawful inquiry or to produce books,
papers, correspondence, memoranda, and other records, if in his power
so to do, in obedience to the subpena of the Commission, shall be
guilty of a misdemeanor and, upon conviction, shall be subject to
a fine of not more than $1,000 or to imprisonment for a term of not
more than one year, or both.
5-221
(d) Injunction proceedings.
(1) Whenever it shall appear to the Commission
that any person is engaged or is about to engage in acts or practices
constituting a violation of any provision of this title, the rules
or regulations thereunder, the rules of a national securities exchange
or registered securities association of which such person is a member
or a person associated with a member, the rules of a registered clearing
agency in which such person is a participant, the rules of the Public
Company Accounting Oversight Board, of which such person is a registered
public accounting firm or a person associated with such a firm, or
the rules of the Municipal Securities Rulemaking Board, it may in
its discretion bring an action in the proper district court of the
United States District Court for the District of Columbia, or the
United States courts of any territory or other place subject to the
jurisdiction of the United States, to enjoin such acts or practices,
and upon a proper showing a permanent or temporary injunction or restraining
order shall be granted without bond. The Commission may transmit such
evidence as may be available concerning such acts or practices as
may constitute a violation of any provision of this title or the rules
or regulations thereunder to the Attorney General, who may, in his
discretion, institute the necessary criminal proceedings under this
title.
5-221.1
(2) In any proceeding
under paragraph (1) of this subsection, the court may prohibit, conditionally
or unconditionally, and permanently or for such period of time as
it shall determine, any person who violated section 10(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 12 of this title or that is required to file reports
pursuant to section 15(d) of this title if the person’s conduct
demonstrates unfitness to serve as an officer or director of any such
issuer.
5-221.2
(3)(A) Whenever it shall appear
to the Commission that any person has violated any provision of this
title, the rules or regulations thereunder, or a cease-and-desist
order entered by the Commission pursuant to section 21C of this title,
other than by committing a violation subject to a penalty pursuant
to section 21A, the Commission may bring an action in a United States
district court to seek, and the court shall have jurisdiction to—
(i) impose, upon a proper showing, a civil penalty to be paid by
the person who committed such violation; and
(ii) require disgorgement under paragraph
(7) of any unjust enrichment by the person who received such unjust
enrichment as a result of such violation.
5-221.3
(B)(i) The
amount of a civil penalty imposed under subparagraph (A)(i) shall
be determined by the court in light of the facts and circumstances.
For each violation, the amount of the penalty shall not exceed the
greater of (I) $5,000 for a natural person or $50,000 for any other
person, or (II) the gross amount of pecuniary gain to such defendant
as a result of the violation.
(ii) Notwithstanding clause (i), the amount
of a civil penalty imposed under subparagraph (A)(i) for each such
violation shall not exceed the greater of (I) $50,000 for a natural
person or $250,000 for any other person, or (II) the gross amount
of pecuniary gain to such defendant as a result of the violation,
if the violation described in subparagraph (A) involved fraud, deceit,
manipulation, or deliberate or reckless disregard of a regulatory
requirement.
(iii) Notwithstanding
clauses (i) and (ii), the amount of a civil penalty imposed under
subparagraph (A)(i) for each violation described in that subparagraph
shall not exceed the greater of (I) $100,000 for a natural person
or $500,000 for any other person, or (II) the gross amount of pecuniary
gain to such defendant as a result of the violation, if—
(aa) the violation described in sub-paragraph
(A) involved fraud, deceit, manipulation, or deliberate or reckless
disregard of a regulatory requirement; and
(bb) such violation directly or indirectly
resulted in substantial losses or created a significant risk of sub-
stantial losses to other persons.
5-221.4
(C)(i) 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.
(ii) 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.
(iii) The actions authorized
by this paragraph may be brought in addition to any other action that
the Commission or the Attorney General is entitled to bring.
(iv) For purposes of section 27
of this title, actions under this paragraph shall be actions to enforce
a liability or a duty created by this title.
5-221.5
(D) In an action to enforce a cease-and-desist
order entered by the Commission pursuant to section 21C, each separate
violation of such order shall be a separate offense, except that in
the case of a violation through a continuing failure to comply with
the order, each day of the failure to comply shall be deemed a separate
offense.
(4) Except as otherwise ordered by the court upon motion by the Commission,
or, in the case of an administrative action, as otherwise ordered
by the Commission, funds disgorged under paragraph (7) as the result
of an action brought by the Commission in Federal court, or as a result
of any Commission administrative action, shall not be distributed
as payment for attorneys’ fees or expenses incurred by private
parties seeking distribution of the disgorged funds.
(5) In any action or proceeding brought
or instituted by the Commission under any provision of the securities
laws, the Commission may seek, and any Federal court may grant, any
equitable relief that may be appropriate or necessary for the benefit
of investors.
(6)(A) In any proceeding under
paragraph (1) against any person participating in, or, at the timeof
the alleged misconduct who was participating in, an offering of penny
stock, the court may prohibit that person from participating in an
offering of penny stock, conditionally or unconditionally, and permanently
or for such period of time as the court shall determine.
(B) For purposes of this
paragraph, the term “person participating in an offering of
penny stock” includes any person engaging in activities with
a broker, dealer, or issuer for purposes of issuing, trading, or inducing
or attempting to induce the purchase or sale of, any penny stock.
The Commission may, by rule or regulation, define such term to include
other activities, and may, by rule, regulation, or order, exempt any
person or class of persons, in whole or in part, conditionally or
unconditionally, from inclusion in such term.
(7) In any action or proceeding
brought by the Commission under any provision of the securities laws,
the Commission may seek, and any Federal court may order, disgorgement.
(8)(A) The Commission may bring
a claim for disgorgement under paragraph (7)—
(i) not later than
5 years after the latest date of the violation that gives rise to
the action or proceeding in which the Commission seeks the claim occurs;
or
(ii) not later than
10 years after the latest date of the violation that gives rise to
the action or proceeding in which the Commission seeks the claim if
the violation involves conduct that violates—
(I) section 10(b);
(II) section 17(a)(1) of the Securities Act
of 1933 (15 U.S.C. 77q(a)(1));
(III) section 206(1) of the Investment Advisers
Act of 1940 (15 U.S.C. 80b-6(1)); or
(IV) any other provision of the securities
laws for which scienter must be established.
(B) The Commission
may seek a claim for any equitable remedy, including for an injunction
or for a bar, suspension, or cease and desist order, not later than
10 years after the latest date on which a violation that gives rise
to the claim occurs.
(C) For the purposes of calculating any limitations period under
this paragraph with respect to an action or claim, any time in which
the person against which the action or claim, as applicable, is brought
is outside of the United States shall not count towards the accrual
of that period.
(9) Nothing in paragraph (7) may be construed
as altering any right that any private party may have to maintain
a suit for a violation of this Act.
5-222
(e) Mandamus. Upon application of the Commission
the district courts of the United States and the United States courts
of any territory or other place subject to the jurisdiction of the
United States shall have jurisdiction to issue writs of mandamus,
injunctions, and orders commanding (1) any person to comply with the
provisions of this title, the rules, regulations, and orders thereunder,
the rules of a national securities exchange or registered securities
association of which such person is a member or person associated
with a member, the rules of a registered clearing agency in which
such person is a participant, the rules of the Public Company Accounting
Oversight Board, of which such person is a registered accounting firm
or a person associated with such a firm, the rules of the Municipal
Securities Rulemaking Board, or any undertaking contained in a registration
statement as provided in subsection (d) of section 15 of this title,
(2) any national securities exchange or registered securities association
to enforce compliance by its members and persons associated with its
members with the provisions of this title, the rules, regulations,
and orders thereunder, and the rules of such exchange or association,
or (3) any registered clearing agency to enforce compliance by its
participants with the provisions of the rules of such clearing agency.
5-223
(f) Rules of self-regulatory
organizations. Notwithstanding any other provision of this title,
the Commission shall not bring any action pursuant to subsection (d)
or (e) of this section against any persons for violation of, or to
command compliance with, the rules of a self-regulatory organization
or the Public Company Accounting Oversight Board unless it appears
to the Commission that (1) such self-regulatory organization or the
Public Company Accounting Oversight Board is unable or unwilling to
take appropriate action against such person in the public interest
and for the protection of investors, or (2) such action is otherwise
necessary or appropriate in the public interest or for the protection
of investors.
5-224
(g) Consolidation of actions;
consent of Commission. Notwithstanding the provisions of section
1407(a) of title 28, United States Code, or any other provision of
law, no action for equitable relief instituted by the Commission pursuant
to the securities laws shall be consolidated or coordinated with other
actions not brought by the Commission, even though such other actions
may involve common questions of fact, unless such consolidation is
consented to by the Commission.
5-224.1
(h) (1) The Right to Financial Privacy
Act of 1978 shall apply with respect to the Commission, except as
otherwise provided in this subsection.
(2) Notwithstanding section 1105 or 1107
of the Right to Financial Privacy Act of 1978, the Commission may
have access to and obtain copies of, or the information contained
in financial records of a customer from a financial institution without
prior notice to the customer upon an ex parte showing to an appropriate
United States district court that the Commission seeks such financial
records pursuant to a subpena issued in conformity with the requirements
of section 19(b) of the Securities Act of 1933, section 21(b) of the
Securities Exchange Act of 1934, section 42(b) of the Investment Company
Act of 1940, or section 209(b) of the Investment Advisers Act of 1940,
and that the Commission has reason to believe that—
(A) delay
in obtaining access to such financial records, or the required notice,
will result in—
(i) flight from prosecution;
(ii) destruction of or tampering with evidence;
(iii) transfer of assets
or records outside the territorial limits of the United States;
(iv) improper conversion
of investor assets; or
(v) impeding the ability of the Commission to identify or trace the
source or disposition of funds involved in any securities transaction;
(B)
such financial records are necessary to identify or trace the record
or beneficial ownership interest in any security;
(C) the acts, practices or course of
conduct under investigation involve—
(i) the dissemination
of materially false or misleading information concerning any security,
issuer, or market, or the failure to make disclosures required under
the securities laws, which remain uncorrected; or
(ii) a financial loss to investors or other
persons protected under the securities laws which remains substantially
uncompensated; or
(D) the acts, practices or course of
conduct under investigation—
(i) involve significant financial
speculation in securities; or
(ii) endanger the stability of any financial
or investment intermediary.
5-224.2
(3) Any application under paragraph (2)
for a delay in notice shall be made with reasonable specificity.
(4)(A) Upon a showing described
in paragraph (2), the presiding judge or magistrate shall enter an
ex parte order granting the requested delay for a period not to exceed
ninety days and an order prohibiting the financial institution involved
from disclosing that records have been obtained or that a request
for records has been made.
(B) Extensions of the period of delay
of notice provided in subparagraph (A) of up to ninety days each may
be granted by the court upon application, but only in accordance with
this subsection or section 1109(a), (b)(1), or (b)(2) of the Right
to Financial Privacy Act of 1978.
(C) Upon expiration of the period of
delay of notification ordered under subparagraph (A) or (B), the customer
shall be served with or mailed a copy of the subpena insofar as it
applies to the customer together with the following notice which shall
describe with reasonable specificity the nature of the investigation
for which the Commission sought the financial records:
“Records or information concerning your transactions
which are held by the financial institution named in the attached
subpena were supplied to the Securities and Exchange Commission on
(date). Notification was withheld pursuant to a determination by the
(title of court so ordering) under section 21(h) of the Securities
Exchange Act of 1934 that (state reason). The purpose of the investigation
or official proceeding was (state purpose)”.
5-224.3
(5) Upon application by the
Commission, all proceedings pursuant to paragraphs (2) and (4) shall
be held in camera and the records thereof sealed until expiration
of the period of delay or such other date as the presiding judge or
magistrate may permit.
(6) [Repealed by act of Dec. 18, 2015 (129 Stat. 3030).]
5-224.4
(7)(A)
Following the expiration of the period of delay of notification ordered
by the court pursuant to paragraph (4) of this subsection, the customer
may, upon motion, reopen the proceeding in the district court which
issued the order. If the presiding judge or magistrate finds that
the movant is the customer to whom the records obtained by the Commission
pertain, and that the Commission has obtained financial records or
information contained therein in violation of this subsection, other
than paragraph (1), it may order that the customer be granted civil
penalties against the Commission in an amount equal to the sum of—
(i) $100 without regard to the volume of records involved;
(ii) any out-of-pocket damages
sustained by the customer as a direct result of the disclosure; and
(iii) if the violation is
found to have been willful, intentional, and without good faith, such
punitive damages as the court may allow, together with the costs of
the action and reasonable attorney’s fees as determined by the
court.
(B) Upon a finding that the Commission has obtained financial records
or information contained therein in violation of this subsection,
other than paragraph (1), the court, in its discretion, may also or
in the alternative issue injunctive relief to require the Commission
to comply with this subsection with respect to any subpena which the
Commission issues in the future for financial records of such customer
for purposes of the same investigation.
(C) Whenever the court determines that
the Commission has failed to comply with this subsection, other than
paragraph (1), and the court finds that the circumstances raise questions
of whether an officer or employee of the Commission acted in a willful
and intentional manner and without good faith with respect to the
violation, the Office of Personnel Management shall promptly initiate
a proceeding to determine whether disciplinary action is warranted
against the agent or employee who was primarily responsible for the
violation. After investigating and considering the evidence submitted,
the Office of Personnel Management shall submit its findings and recommendations
to the Commission and shall send copies of the findings and recommendations
to the officer or employee or his representative. The Commission shall
take the corrective action that the Office of Personnel Management
recommends.
5-224.5
(8) The relief described in paragraphs
(7) and (10) shall be the only remedies or sanctions available to
a customer for a violation of this subsection, other than paragraph
(1), and nothing herein or in the Right to Financial Privacy Act of
1978 shall be deemed to prohibit the use in any investigation or proceeding
of financial records, or the information contained therein, obtained
by a subpena issued by the Commission. In the case of an unsuccessful
action under paragraph (7), the court shall award the costs of the
action and attorney’s fees to the Commission if the presiding
judge or magistrate finds that the customer’s claims were made
in bad faith.
(9)(A) The Commission may transfer
financial records or the information contained therein to any government
authority if the Commission proceeds as a transferring agency in accordance
with section 1112 of the Right to Financial Privacy Act of 1978, except
that the customer notice required under section 1112(b) or (c) of
such Act may be delayed upon a showing by the Commission, in accordance
with the procedure set forth in paragraphs (4) and (5), that one or
more of subparagraphs (A) through (D) of paragraph (2) apply.
(B) The Commission
may, without notice to the customer pursuant to section 1112 of the
Right to Financial Privacy Act of 1978, transfer financial records
or the information contained therein to a State securities agency
or to the Department of Justice. Financial records or information
transferred by the Commission to the Department of Justice or to a
State securities agency pursuant to the provisions of this subparagraph
may be disclosed or used only in an administrative, civil, or criminal
action or investigation by the Department of Justice or the State
securities agency which arises out of or relates to the acts, practices,
or courses of conduct investigated by the Commission, except that
if the Department of Justice or the State securities agency determines
that the information should be disclosed or used for any other purpose,
it may do so if it notifies the customer, except as otherwise provided
in the Right to Financial Privacy Act of 1978, within 30 days of its
determination, or complies with the requirements of section 1109 of
such Act regarding delay of notice.
5-224.6
(10) Any government authority violating
paragraph (9) shall be subject to the procedures and penalties applicable
to the Commission under paragraph (7)(A) with respect to a violation
by the Commission in obtaining financial records.
(11) Notwithstanding the provisions of
this subsection, the Commission may obtain financial records from
a financial institution or transfer such records in accordance with
provisions of the Right to Financial Privacy Act of 1978.
(12) Nothing in this subsection
shall enlarge or restrict any rights of a financial institution to
challenge requests for records made by the Commission under existing
law. Nothing in this subsection shall entitle a customer to assert
any rights of a financial institution.
(13) Unless the context otherwise requires,
all terms defined in the Right to Financial Privacy Act of 1978 which
are common to this subsection shall have the same meaning as in such
Act.
5-224.61
(i) Information
to CFTC. The Commission shall provide the Commodity Futures Trading
Commission with notice of the commencement of any proceeding and a
copy of any order entered by the Commission against any broker or
dealer registered pursuant to section 15(b)(11), any exchange registered
pursuant to section 6(g), or any national securities association registered
pursuant to section 15A(k).
[15 USC 78u. As amended
by acts of May 27, 1936 (49 Stat. 1379); June 4, 1975 (89 Stat. 154);
Oct. 10, 1980 (94 Stat. 1855); Aug. 10, 1984 (98 Stat. 1264); Dec.
4, 1987 (101 Stat. 1259); Nov. 19, 1988 (102 Stat. 4677, 4681); Oct.
15, 1990 (104 Stat. 935); Dec. 22, 1995 (109 Stat. 756, 757); Dec.
21, 2000 (114 Stat. 2763A-426); July 30, 2002 (116 Stat. 749, 779,
785, 794); July 21, 2010 (124 Stat. 1854, 1855); Dec. 18, 2015 (129
Stat. 3030); and Jan. 1, 2021 (134 Stat. 4625). The name of the Supreme
Court of the District of Columbia was changed to “district court
of the United States for the District of Columbia” by act of
June 25, 1936 (49 Stat. 1921), which name in turn was changed to United
States District Court for the District of Columbia by the act of May
24, 1949 (63 Stat. 107).]
