Statements on Introduced Bills and Joint Resolutions

Floor Speech

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Mr. President, the Stronger Enforcement of Civil Penalties Act, which I am pleased to be introducing today with Senator Grassley and Senator Leahy, will enhance the ability of securities regulators to protect investors and demand greater accountability from market players. Unfortunately, even after the financial crisis that crippled the economy, we continue to see calculated wrongdoing by some on Wall Street. Without the consequence of meaningful penalties to serve as an effective deterrent, I fear this disturbing culture of misconduct will persist.

The existing regime for securities law violations limits by statute the amount of penalties the Securities and Exchange Commission, SEC, can fine an institution or individual. During hearings I held in 2011 in the Securities, Insurance, and Investment Banking Subcommittee, I learned how this limitation significantly interferes with the SEC's ability to perform its enforcement duties. At that time, the agency had been criticized by a Federal judge for not obtaining a larger settlement against Citigroup, a major player in the financial crisis that settled with the SEC in an amount that was a fraction of the cost the bank had inflicted on investors. The SEC explained that the reason for the low settlement amount was a statutory prohibition from levying a larger penalty.

The bipartisan bill Senator Grassley and I are introducing updates and strengthens the SEC's civil penalties statute. It aims to make potential and current offenders think twice before engaging in misconduct by increasing the maximum civil monetary penalties permitted by statute, directly linking the size of the maximum penalties to the amount of losses suffered by victims of a violation, and substantially raising the financial stakes for repeat offenders of our nation's securities laws.

Specifically, our bill would give the SEC more options to tailor penalties to the specific circumstances of a given violation. In addition to raising the per violation caps for severe, or ``tier three,'' violations to $1 million per offense for individuals and $10 million per offense for entities, the bill would also give the SEC additional options to obtain greater penalties based on the ill-gotten gains of the violator or on the financial harm to investors.

Our bill also addresses the disconcerting trend of repeat offenders on Wall Street through two provisions. The first would allow the SEC to triple the penalty cap applicable to recidivists who have been held either criminally or civilly liable for securities fraud within the preceding five years. The second would allow the SEC to seek a civil penalty against those that violate existing federal court or SEC orders, an approach that would be more efficient, effective, and flexible than the current civil contempt remedy. These two changes would substantially improve the ability of the SEC's enforcement program to ratchet up penalties for recidivists.

More than half of all U.S. households own securities. They deserve a strong cop on the beat that has the tools it needs to go after fraudsters and pursue the difficult cases arising from our increasingly complex financial markets. The Stronger Enforcement of Civil Penalties Act will give the SEC more tools to demand meaningful accountability from Wall Street, which in turn will increase transparency and confidence in our financial system. I urge our colleagues to support this important bipartisan legislation to enhance the SEC's ability to protect investors and crack down on fraud.

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