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116th Congress    }                                     {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session       }                                     {      116-410

======================================================================



 
          STRONGER ENFORCEMENT OF CIVIL PENALTIES ACT OF 2019

                                _______
                                

 February 27, 2020.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

  Ms. Waters, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 3641]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 3641) to enhance civil penalties under the 
Federal securities laws, and for other purposes, having 
considered the same, reports favorably thereon with an 
amendment and recommends that the bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     8
Background and Need for Legislation..............................     8
Section-by-Section Analysis......................................     8
Hearings.........................................................    10
Committee Consideration..........................................    10
Committee Votes..................................................    11
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................    13
Statement of Performance Goals and Objectives....................    13
New Budget Authority and CBO Cost Estimate.......................    13
Committee Cost Estimate..........................................    19
Unfunded Mandate Statement.......................................    19
Advisory Committee...............................................    19
Application of Law to the Legislative Branch.....................    19
Earmark Statement................................................    19
Duplication of Federal Programs..................................    20
Changes to Existing Law..........................................    20

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Stronger Enforcement of Civil 
Penalties Act of 2019''.

SEC. 2. UPDATED CIVIL MONEY PENALTIES FOR SECURITIES LAWS VIOLATIONS.

  (a) Securities Act of 1933.--
          (1) Money penalties in administrative actions.--Section 
        8A(g)(2) of the Securities Act of 1933 (15 U.S.C. 77h-1(g)(2)) 
        is amended--
                  (A) in subparagraph (A)--
                          (i) by striking ``$7,500'' and inserting 
                        ``$10,000''; and
                          (ii) by striking ``$75,000'' and inserting 
                        ``$100,000'';
                  (B) in subparagraph (B)--
                          (i) by striking ``$75,000'' and inserting 
                        ``$100,000''; and
                          (ii) by striking ``$375,000'' and inserting 
                        ``$500,000''; and
                  (C) by striking subparagraph (C) and inserting the 
                following:
                  ``(C) Third tier.--
                          ``(i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), for a third tier act 
                        or omission, the amount of penalty for each 
                        such act or omission shall not exceed the 
                        greater of--
                                  ``(I) $1,000,000 for a natural person 
                                or $10,000,000 for any other person;
                                  ``(II) 3 times the gross amount of 
                                pecuniary gain to the person who 
                                committed the act or omission; or
                                  ``(III) the amount of losses incurred 
                                by victims as a result of the act or 
                                omission.
                          ``(ii) Third tier act or omission.--For the 
                        purposes of this subparagraph, the term `third 
                        tier act or omission' means an act or omission 
                        described in paragraph (1) that--
                                  ``(I) involved fraud, deceit, 
                                manipulation, or deliberate or reckless 
                                disregard of a regulatory requirement; 
                                and
                                  ``(II) directly or indirectly--
                                          ``(aa) resulted in 
                                        substantial losses to other 
                                        persons;
                                          ``(bb) created a significant 
                                        risk of substantial losses to 
                                        other persons; or
                                          ``(cc) resulted in 
                                        substantial pecuniary gain to 
                                        the person who committed the 
                                        act or omission.''.
          (2) Money penalties in civil actions.--Section 20(d)(2) of 
        the Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is amended--
                  (A) in subparagraph (A)--
                          (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                          (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                  (B) in subparagraph (B)--
                          (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                          (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                  (C) by striking subparagraph (C) and inserting the 
                following:
                  ``(C) Third tier.--
                          ``(i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), for a third tier 
                        violation, the amount of penalty for each 
                        violation shall not exceed the greater of--
                                  ``(I) $1,000,000 for a natural person 
                                or $10,000,000 for any other person;
                                  ``(II) 3 times the gross amount of 
                                pecuniary gain to the person who 
                                committed the violation; or
                                  ``(III) the amount of losses incurred 
                                by victims as a result of the 
                                violation.
                          ``(ii) Third tier violation.--For the 
                        purposes of this subparagraph, the term `third 
                        tier violation' means a violation described in 
                        paragraph (1) that--
                                  ``(I) involved fraud, deceit, 
                                manipulation, or deliberate or reckless 
                                disregard of a regulatory requirement; 
                                and
                                  ``(II) directly or indirectly--
                                          ``(aa) resulted in 
                                        substantial losses to other 
                                        persons;
                                          ``(bb) created a significant 
                                        risk of substantial losses to 
                                        other persons; or
                                          ``(cc) resulted in 
                                        substantial pecuniary gain to 
                                        the person who committed the 
                                        violation.''.
  (b) Securities Exchange Act of 1934.--
          (1) Money penalties in civil actions.--Section 21(d)(3)(B) of 
        the Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(B)) is 
        amended--
                  (A) in clause (i)--
                          (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                          (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                  (B) in clause (ii)--
                          (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                          (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                  (C) by striking clause (iii) and inserting the 
                following:
                          ``(iii) Third tier.--
                                  ``(I) In general.--Notwithstanding 
                                clauses (i) and (ii), for a third tier 
                                violation, the amount of penalty for 
                                each such violation shall not exceed 
                                the greater of--
                                          ``(aa) $1,000,000 for a 
                                        natural person or $10,000,000 
                                        for any other person;
                                          ``(bb) 3 times the gross 
                                        amount of pecuniary gain to the 
                                        person who committed the 
                                        violation; or
                                          ``(cc) the amount of losses 
                                        incurred by victims as a result 
                                        of the violation.
                                  ``(II) Third tier violation.--For the 
                                purposes of this clause, the term 
                                `third tier violation' means a 
                                violation described in subparagraph (A) 
                                that--
                                          ``(aa) involved fraud, 
                                        deceit, manipulation, or 
                                        deliberate or reckless 
                                        disregard of a regulatory 
                                        requirement; and
                                          ``(bb) directly or 
                                        indirectly--
                                                  ``(AA) resulted in 
                                                substantial losses to 
                                                other persons;
                                                  ``(BB) created a 
                                                significant risk of 
                                                substantial losses to 
                                                other persons; or
                                                  ``(CC) resulted in 
                                                substantial pecuniary 
                                                gain to the person who 
                                                committed the 
                                                violation.''.
          (2) Money penalties in administrative actions.--Section 
        21B(b) of the Securities Exchange Act of 1934 (15 U.S.C. 78u-
        2(b)) is amended--
                  (A) in paragraph (1)--
                          (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                          (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                  (B) in paragraph (2)--
                          (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                          (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                  (C) by striking paragraph (3) and inserting the 
                following:
          ``(3) Third tier.--
                  ``(A) In general.--Notwithstanding paragraphs (1) and 
                (2), for a third tier act or omission, the amount of 
                penalty for each such act or omission shall not exceed 
                the greater of--
                          ``(i) $1,000,000 for a natural person or 
                        $10,000,000 for any other person;
                          ``(ii) 3 times the gross amount of pecuniary 
                        gain to the person who committed the act or 
                        omission; or
                          ``(iii) the amount of losses incurred by 
                        victims as a result of the act or omission.
                  ``(B) Third tier act or omission.--For the purposes 
                of this paragraph, the term `third tier act or 
                omission' means an act or omission described in 
                paragraph (1) that--
                          ``(i) involved fraud, deceit, manipulation, 
                        or deliberate or reckless disregard of a 
                        regulatory requirement; and
                          ``(ii) directly or indirectly--
                                  ``(I) resulted in substantial losses 
                                to other persons;
                                  ``(II) created a significant risk of 
                                substantial losses to other persons; or
                                  ``(III) resulted in substantial 
                                pecuniary gain to the person who 
                                committed the act or omission.''.
  (c) Investment Company Act of 1940.--
          (1) Money penalties in administrative actions.--Section 
        9(d)(2) of the Investment Company Act of 1940 (15 U.S.C. 80a-
        9(d)(2)) is amended--
                  (A) in subparagraph (A)--
                          (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                          (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                  (B) in subparagraph (B)--
                          (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                          (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                  (C) by striking subparagraph (C) and inserting the 
                following:
                  ``(C) Third tier.--
                          ``(i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), for a third tier act 
                        or omission, the amount of penalty for each 
                        such act or omission shall not exceed the 
                        greater of--
                                  ``(I) $1,000,000 for a natural person 
                                or $10,000,000 for any other person;
                                  ``(II) 3 times the gross amount of 
                                pecuniary gain to the person who 
                                committed the act or omission; or
                                  ``(III) the amount of losses incurred 
                                by victims as a result of the act or 
                                omission.
                          ``(ii) Third tier act or omission.--For the 
                        purposes of this subparagraph, the term `third 
                        tier act or omission' means an act or omission 
                        described in paragraph (1) that--
                                  ``(I) involved fraud, deceit, 
                                manipulation, or deliberate or reckless 
                                disregard of a regulatory requirement; 
                                and
                                  ``(II) directly or indirectly--
                                          ``(aa) resulted in 
                                        substantial losses to other 
                                        persons;
                                          ``(bb) created a significant 
                                        risk of substantial losses to 
                                        other persons; or
                                          ``(cc) resulted in 
                                        substantial pecuniary gain to 
                                        the person who committed the 
                                        act or omission.''.
          (2) Money penalties in civil actions.--Section 42(e)(2) of 
        the Investment Company Act of 1940 (15 U.S.C. 80a-41(e)(2)) is 
        amended--
                  (A) in subparagraph (A)--
                          (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                          (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                  (B) in subparagraph (B)--
                          (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                          (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                  (C) by striking subparagraph (C) and inserting the 
                following:
                  ``(C) Third tier.--
                          ``(i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), for a third tier 
                        violation, the amount of penalty for each such 
                        violation shall not exceed the greater of--
                                  ``(I) $1,000,000 for a natural person 
                                or $10,000,000 for any other person;
                                  ``(II) 3 times the gross amount of 
                                pecuniary gain to the person who 
                                committed the violation; or
                                  ``(III) the amount of losses incurred 
                                by victims as a result of the 
                                violation.
                          ``(ii) Third tier violation.--For the 
                        purposes of this subparagraph, the term `third 
                        tier violation' means a violation described in 
                        paragraph (1) that--
                                  ``(I) involved fraud, deceit, 
                                manipulation, or deliberate or reckless 
                                disregard of a regulatory requirement; 
                                and
                                  ``(II) directly or indirectly--
                                          ``(aa) resulted in 
                                        substantial losses to other 
                                        persons;
                                          ``(bb) created a significant 
                                        risk of substantial losses to 
                                        other persons; or
                                          ``(cc) resulted in 
                                        substantial pecuniary gain to 
                                        the person who committed the 
                                        violation.''.
  (d) Investment Advisers Act of 1940.--
          (1) Money penalties in administrative actions.--Section 
        203(i)(2) of the Investment Advisers Act of 1940 (15 U.S.C. 
        80b-3(i)(2)) is amended--
                  (A) in subparagraph (A)--
                          (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                          (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                  (B) in subparagraph (B)--
                          (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                          (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                  (C) by striking subparagraph (C) and inserting the 
                following:
                  ``(C) Third tier.--
                          ``(i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), for a third tier act 
                        or omission, the amount of penalty for each 
                        such act or omission shall not exceed the 
                        greater of--
                                  ``(I) $1,000,000 for a natural person 
                                or $10,000,000 for any other person;
                                  ``(II) 3 times the gross amount of 
                                pecuniary gain to the person who 
                                committed the act or omission; or
                                  ``(III) the amount of losses incurred 
                                by victims as a result of the act or 
                                omission.
                          ``(ii) Third tier act or omission.--For the 
                        purposes of this subparagraph, the term `third 
                        tier act or omission' means an act or omission 
                        described in paragraph (1) that--
                                  ``(I) involved fraud, deceit, 
                                manipulation, or deliberate or reckless 
                                disregard of a regulatory requirement; 
                                and
                                  ``(II) directly or indirectly--
                                          ``(aa) resulted in 
                                        substantial losses to other 
                                        persons;
                                          ``(bb) created a significant 
                                        risk of substantial losses to 
                                        other persons; or
                                          ``(cc) resulted in 
                                        substantial pecuniary gain to 
                                        the person who committed the 
                                        act or omission.''.
          (2) Money penalties in civil actions.--Section 209(e)(2) of 
        the Investment Advisers Act of 1940 (15 U.S.C. 80b-9(e)(2)) is 
        amended--
                  (A) in subparagraph (A)--
                          (i) by striking ``$5,000'' and inserting 
                        ``$10,000''; and
                          (ii) by striking ``$50,000'' and inserting 
                        ``$100,000'';
                  (B) in subparagraph (B)--
                          (i) by striking ``$50,000'' and inserting 
                        ``$100,000''; and
                          (ii) by striking ``$250,000'' and inserting 
                        ``$500,000''; and
                  (C) by striking subparagraph (C) and inserting the 
                following:
                  ``(C) Third tier.--
                          ``(i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), for a third tier 
                        violation, the amount of penalty for each such 
                        violation shall not exceed the greater of--
                                  ``(I) $1,000,000 for a natural person 
                                or $10,000,000 for any other person;
                                  ``(II) 3 times the gross amount of 
                                pecuniary gain to the person who 
                                committed the violation; or
                                  ``(III) the amount of losses incurred 
                                by victims as a result of the 
                                violation.
                          ``(ii) Third tier violation.--For the 
                        purposes of this subparagraph, the term `third 
                        tier violation' means a violation described in 
                        paragraph (1) that--
                                  ``(I) involved fraud, deceit, 
                                manipulation, or deliberate or reckless 
                                disregard of a regulatory requirement; 
                                and
                                  ``(II) directly or indirectly--
                                          ``(aa) resulted in 
                                        substantial losses to other 
                                        persons;
                                          ``(bb) created a significant 
                                        risk of substantial losses to 
                                        other persons; or
                                          ``(cc) resulted in 
                                        substantial pecuniary gain to 
                                        the person who committed the 
                                        violation.''.

SEC. 3. PENALTIES FOR RECIDIVISTS.

  (a) Securities Act of 1933.--
          (1) Cease-and-desist proceedings.--Section 8A(g)(2) of the 
        Securities Act of 1933 (15 U.S.C. 77h-1(g)(2)) is amended by 
        adding at the end the following:
                  ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), the maximum amount of penalty for 
                each such act or omission shall be 3 times the 
                otherwise applicable amount in such subparagraphs if, 
                within the 5-year period preceding such act or 
                omission, the person who committed the act or omission 
                was criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that person.''.
          (2) Injunctions and prosecution of offenses.--Section 
        20(d)(2) of the Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is 
        amended by adding at the end the following:
                  ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), the maximum amount of penalty for 
                each such violation shall be 3 times the otherwise 
                applicable amount in such subparagraphs if, within the 
                5-year period preceding such violation, the defendant 
                was criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that defendant.''.
  (b) Securities Exchange Act of 1934.--
          (1) Civil actions.--Section 21(d)(3)(B) of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(B)) is amended by 
        adding at the end the following:
                  ``(iv) Fourth tier.--Notwithstanding clauses (i), 
                (ii), and (iii), the maximum amount of penalty for each 
                such violation shall be 3 times the otherwise 
                applicable amount in such clauses if, within the 5-year 
                period preceding such violation, the defendant was 
                criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that defendant.''.
          (2) Administrative proceedings.--Section 21B(b) of the 
        Securities Exchange Act of 1934 (15 U.S.C. 78u-2(b)) is amended 
        by adding at the end the following:
          ``(4) Fourth tier.--Notwithstanding paragraphs (1), (2), and 
        (3), the maximum amount of penalty for each such act or 
        omission shall be 3 times the otherwise applicable amount in 
        such paragraphs if, within the 5-year period preceding such act 
        or omission, the person who committed the act or omission was 
        criminally convicted for securities fraud or became subject to 
        a judgment or order imposing monetary, equitable, or 
        administrative relief in any Commission action alleging fraud 
        by that person.''.
  (c) Investment Company Act of 1940.--
          (1) Ineligibility of certain underwriters and affiliates.--
        Section 9(d)(2) of the Investment Company Act of 1940 (15 
        U.S.C. 80a-9(d)(2)) is amended by adding at the end the 
        following:
                  ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), the maximum amount of penalty for 
                each such act or omission shall be 3 times the 
                otherwise applicable amount in such subparagraphs if, 
                within the 5-year period preceding such act or 
                omission, the person who committed the act or omission 
                was criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that person.''.
          (2) Enforcement of certain actions.--Section 42(e)(2) of the 
        Investment Company Act of 1940 (15 U.S.C. 80a-41(e)(2)) is 
        amended by adding at the end the following:
                  ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), the maximum amount of penalty for 
                each such violation shall be 3 times the otherwise 
                applicable amount in such subparagraphs if, within the 
                5-year period preceding such violation, the defendant 
                was criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that defendant.''.
  (d) Investment Advisers Act of 1940.--The Investment Advisers Act of 
1940 (15 U.S.C. 80b-1 et seq.) is amended--
          (1) in section 203(i)(2) (15 U.S.C. 80b-3(i)(2)), by adding 
        at the end the following:
                  ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), the maximum amount of penalty for 
                each such act or omission shall be 3 times the 
                otherwise applicable amount in such subparagraphs if, 
                within the 5-year period preceding such act or 
                omission, the person who committed the act or omission 
                was criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that person.''; and
          (2) in section 209(e)(2) (15 U.S.C. 80b-9(e)(2)) by adding at 
        the end the following:
                  ``(D) Fourth tier.--Notwithstanding subparagraphs 
                (A), (B), and (C), the maximum amount of penalty for 
                each such violation shall be 3 times the otherwise 
                applicable amount in such subparagraphs if, within the 
                5-year period preceding such violation, the defendant 
                was criminally convicted for securities fraud or became 
                subject to a judgment or order imposing monetary, 
                equitable, or administrative relief in any Commission 
                action alleging fraud by that defendant.''.

SEC. 4. VIOLATIONS OF INJUNCTIONS AND BARS.

  (a) Securities Act of 1933.--Section 20(d) of the Securities Act of 
1933 (15 U.S.C. 77t(d)) is amended--
          (1) in paragraph (1), by inserting after ``the rules or 
        regulations thereunder,'' the following: ``a Federal court 
        injunction or a bar obtained or entered by the Commission under 
        this title,''; and
          (2) by striking paragraph (4) and inserting the following:
          ``(4) Special provisions relating to a violation of an 
        injunction or certain orders.--
                  ``(A) In general.--Each separate violation of an 
                injunction or order described in subparagraph (B) shall 
                be a separate offense, except that in the case of a 
                violation through a continuing failure to comply with 
                such injunction or order, each day of the failure to 
                comply with the injunction or order shall be deemed a 
                separate offense.
                  ``(B) Injunctions and orders.--Subparagraph (A) shall 
                apply with respect to any action to enforce--
                          ``(i) a Federal court injunction obtained 
                        pursuant to this title;
                          ``(ii) an order entered or obtained by the 
                        Commission pursuant to this title that bars, 
                        suspends, places limitations on the activities 
                        or functions of, or prohibits the activities of 
                        a person; or
                          ``(iii) a cease-and-desist order entered by 
                        the Commission pursuant to section 8A.''.
  (b) Securities Exchange Act of 1934.--Section 21(d)(3) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78u(d)(3)) is amended--
          (1) in subparagraph (A), by inserting after ``the rules or 
        regulations thereunder,'' the following: ``a Federal court 
        injunction or a bar obtained or entered by the Commission under 
        this title,''; and
          (2) by striking subparagraph (D) and inserting the following:
          ``(D) Special provisions relating to a violation of an 
        injunction or certain orders.--
                  ``(i) In general.--Each separate violation of an 
                injunction or order described in clause (ii) shall be a 
                separate offense, except that in the case of a 
                violation through a continuing failure to comply with 
                such injunction or order, each day of the failure to 
                comply with the injunction or order shall be deemed a 
                separate offense.
                  ``(ii) Injunctions and orders.--Clause (i) shall 
                apply with respect to an action to enforce--
                          ``(I) a Federal court injunction obtained 
                        pursuant to this title;
                          ``(II) an order entered or obtained by the 
                        Commission pursuant to this title that bars, 
                        suspends, places limitations on the activities 
                        or functions of, or prohibits the activities of 
                        a person; or
                          ``(III) a cease-and-desist order entered by 
                        the Commission pursuant to section 21C.''.
  (c) Investment Company Act of 1940.--Section 42(e) of the Investment 
Company Act of 1940 (15 U.S.C. 80a-41(e)) is amended--
          (1) in paragraph (1), by inserting after ``the rules or 
        regulations thereunder,'' the following: ``a Federal court 
        injunction or a bar obtained or entered by the Commission under 
        this title,''; and
          (2) by striking paragraph (4) and inserting the following:
          ``(4) Special provisions relating to a violation of an 
        injunction or certain orders.--
                  ``(A) In general.--Each separate violation of an 
                injunction or order described in subparagraph (B) shall 
                be a separate offense, except that in the case of a 
                violation through a continuing failure to comply with 
                such injunction or order, each day of the failure to 
                comply with the injunction or order shall be deemed a 
                separate offense.
                  ``(B) Injunctions and orders.--Subparagraph (A) shall 
                apply with respect to any action to enforce--
                          ``(i) a Federal court injunction obtained 
                        pursuant to this title;
                          ``(ii) an order entered or obtained by the 
                        Commission pursuant to this title that bars, 
                        suspends, places limitations on the activities 
                        or functions of, or prohibits the activities of 
                        a person; or
                          ``(iii) a cease-and-desist order entered by 
                        the Commission pursuant to section 9(f).''.
  (d) Investment Advisers Act of 1940.--Section 209(e) of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-9(e)) is amended--
          (1) in paragraph (1), by inserting after ``the rules or 
        regulations thereunder,'' the following: ``a Federal court 
        injunction or a bar obtained or entered by the Commission under 
        this title,''; and
          (2) by striking paragraph (4) and inserting the following:
          ``(4) Special provisions relating to a violation of an 
        injunction or certain orders.--
                  ``(A) In general.--Each separate violation of an 
                injunction or order described in subparagraph (B) shall 
                be a separate offense, except that in the case of a 
                violation through a continuing failure to comply with 
                such injunction or order, each day of the failure to 
                comply with the injunction or order shall be deemed a 
                separate offense.
                  ``(B) Injunctions and orders.--Subparagraph (A) shall 
                apply with respect to any action to enforce--
                          ``(i) a Federal court injunction obtained 
                        pursuant to this title;
                          ``(ii) an order entered or obtained by the 
                        Commission pursuant to this title that bars, 
                        suspends, places limitations on the activities 
                        or functions of, or prohibits the activities of 
                        a person; or
                          ``(iii) a cease-and-desist order entered by 
                        the Commission pursuant to section 203(k).''.

                          Purpose and Summary

    On July 9, 2019, Representative Katie Porter introduced 
H.R. 3641, the Stronger Enforcement of Civil Penalties Act, 
which would increase the SEC's statutory limits on civil 
monetary penalties; directly link the size of these penalties 
to the scope of harm and associated investor losses; and 
substantially raise the financial stakes for repeat securities 
law violators.

                  Background and Need for Legislation

    Specifically, the bill would increase the per-violation cap 
applicable to the most serious securities laws violations from 
$181,071 to $1 million per violation for individuals, and from 
$905,353 to $10 million per violation for entities. It would 
also triple the penalty cap for recidivists who have been held 
criminally or civilly liable for securities fraud within the 
preceding five years. The SEC would be able to assess these 
types of penalties through administrative action, and not just 
in federal court.
    H.R. 3641 would increase the deterrence of these civil 
penalties through the increases in penalties provided for in 
this Act. When Congress passed legislation indexing the 
original civil penalty amounts to inflation in 1990, the S&P 
500 had a value of $303.23. Although the S&P 500 is currently 
valued over $3,100, or 10 times the amount in 1990, the 
underlying penalty amounts have not been changed and thus have 
failed to keep up with the rate and magnitude of our financial 
markets and of financial misconduct (although certain penalties 
have increased because they are indexed to inflation). The 
current penalty amounts do not reflect these new market 
realities and so do not adequately deter or penalize bad 
actors. Instead, many actors sees these fines as a cost of 
doing business and a necessary expense for maximizing financial 
gains.
    This increased authority is consistent with that requested 
by former SEC Chair Schapiro and agreed to by former SEC Chair 
White.\1\ This bill is similar to a bipartisan bill in the 
Senate (S. 779) and a modest increase to a provision in former 
Chairman Hensarling's CHOICE Act from the 115th Congress 
(Section 211 of H.R. 10). This bill is supported by North 
American Securities Administrators Association (NASAA) and 
Public Citizen.
---------------------------------------------------------------------------
    \1\Letter from SEC Chairman Mary Schapiro to Senator Jack Reed re: 
SEC Penalty Authority (Nov. 28, 2011), available at http://
www.davispolk.com/files/uploads/IMG/Mary-Schapiro--Letter-to-Senator-
Jack-Reed.pdf.
---------------------------------------------------------------------------

                      Section-by-Section Analysis


Section 1. Short title

    This section states that the title of the bill is the 
Stronger Enforcement of Civil Penalties Act of 2019.

Section 2. Updated civil money penalties for securities laws violations

    This section increased penalties in a like manner for the 
Securities Act of 1933, the Securities Exchange Act of 1934, 
the Investment Company Act of 1940 and the Investor Advisers 
Act of 1940.
    Subsection (a) of Section 2 amends the Securities Act of 
1933:
    Paragraph (1) of subsection (a) amends Section 8A(g)(2) the 
Securities Act of 1933 (relating to cease and desist orders) to 
increase penalties in administrative actions:
    Subparagraph (A) amends section 8A(g)(2)(A) by striking 
``$7,500'' and inserting ``$10,000'' and by striking 
``$75,000'' and inserting ``$100,000'', increasing the penalty 
amounts for natural and other persons, respectively, for first 
tier penalties.
    Subparagraph (B) amends section 8A(g)(2)(B) by striking 
``$75,000'' and inserting $100,000'' and by striking 
``$375,000'' and inserting ``$500,000'', increasing the penalty 
amounts for natural and other persons respectively for second 
tier penalties (where the act or omission involved fraud, 
deceit, manipulation or deliberate or reckless disregard of a 
regulatory requirement).
    Subparagraph (C) amends section 8A(g)(2)(C) and limits the 
amount of the penalty to: $1,000,000 for a natural person or 
$10,000,000 for any other person; 3 times the gross amount of 
pecuniary gain to the person who committed the act or omission; 
or the amount of losses incurred by victims as a result of the 
act or omission, for third tier penalties (where the act or 
omission involved fraud, deceit, manipulation or deliberate or 
reckless disregard of a regulatory requirement and the act or 
omission directly or indirectly resulted in a substantial 
losses to other persons, created a significant risk of 
substantial losses to other persons, or resulted in substantial 
pecuniary gain to the person who committed the act or 
omission).
    Paragraph (2) of Subsection (a) amends Section 20(d)(2) of 
the Securities Act of 1933 (relating to injunctions and civil 
actions).
    Subparagraph (A) amends section 20(d)(2)(A) by: striking 
``$5,000'' and inserting ``$10,000'' and by striking 
``$50,000'' and inserting ``$100,000'', increasing the penalty 
amounts for natural and other persons, respectively, for first 
tier penalties
    Subparagraph (B) amends section 20(d)(2)(B) by striking 
``$50,000'' and inserting ``$100,000''; and 12 by striking 
``$250,000'' and inserting ``$500,000'' increasing the penalty 
amounts for natural and other persons, respectively, for second 
tier penalties
    Subparagraph (C): amends section 20(d)(2)(C) by revising 
the penalties for third tier violations to be no greater than 
$1,000,000 for a natural person or $10,000,000 for any other 
person; 3 times the gross amount of pecuniary gain to the 
person who committed the violation; or the amount of losses 
incurred by the victim as a result of the violation, for third 
tier penalties.
    Subsection (b) of section 2 amends section 21(d)(3)(B) and 
section 21B(b) of the Securities Exchange Act of 1934: The 
amendments are similar to the amendments made to the Securities 
Act of 1933, amending the penalties for tier one, two and three 
offenses in the same manner as subsection (a) amends the 
Securities Act of 1933.
    Subsection (c) of Section 2 amends section 9(d)(2) and 
42(e)(2) of the Investment Company Act of 1940: The amendments 
are similar to the amendments made to the Securities Act of 
1933, amending the penalties for tier one, two and three 
offenses in the same manner as subsection (a) amends the 
Securities Act of 1933.
    Subsection (d) of Section 2 amends section 203(i)(2) and 
209(e)(2) of the Investment Advisors Act of 1940. The 
amendments are similar to the amendments made to the Securities 
Act of 1933, amending the penalties for tier one, two and three 
offenses in the same manner as subsection (a) amends the 
Securities Act of 1933.

Section 3. Penalties for recidivists

    Section 3 amends sections 8A(g)(2) and 20(d)(2) of the 
Securities Act of 1933; sections 21(d)(3)(B) and 21B(b) of the 
Securities Exchange Act of 1934; sections 9(d)(2) of the 
Investment Company Act of 1940; sections 42(e)(2) of the 
Investment Company Act of 1940; and sections 203(i)(2) and 
sections 209(e)(2) of the Investment Advisers Act of 1940 to 
add a fourth tier to each provision. The new fourth tier 
provides for a maximum penalty in an amount equal to 3 times 
the otherwise applicable amount if the person within the 5-year 
period preceding the violation or omission was criminally 
convicted for securities fraud or became subject to a judgment 
or order imposing monetary, equitable, or administrative relief 
in any Commission action alleging fraud by that person.

Section 4. Violations of injunctions and bars

    Section 4 amends section 20(d) of the Securities Act of 
1933; section 21(d)(3) of the Securities Exchange Act of 1934; 
Section 42(e) of the Investment Company Act of 1940; and 
section 209(e) of the Investment Advisers Act of 1940 to add a 
fourth tier, which explicitly requires in each provision that 
each separate violation of an injunction order is to be 
considered a separate offense and that injunctions and orders 
shall apply to any action to enforce a federal court 
injunction, an order entered or obtained by the Commission, or 
a cease-and-desist order entered by the Commission.

                                Hearings

    For the purposes of section 103(i) of H. Res. 6 for the 
116th Congress, the Committee on Financial Services' 
Subcommittee on Investor Protection, Entrepreneurship, and 
Capital Markets held a hearing to consider H.R. 3641 entitled, 
``Putting Investors First: Examining Proposals to Strengthen 
Enforcement Against Securities Law Violators'' on June 19, 
2019. Testifying before the Committee was Jordan A. Thomas, 
Partner, Labaton Sucharow; Urska Velikonja, Professor of Law, 
Georgetown University Law Center; Andrew N. Vollmer, Professor 
of Law, University of Virginia School of Law; and Stephen 
Crimmins, Partner, Murphy & McGonigle, PC.

                        Committee Consideration

    The Committee on Financial Services met in open session on, 
and ordered H.R. 3641 to be reported favorably to the House 
with an amendment in the nature of a substitute by a vote of 33 
yeas and 25 nays, a quorum being present.

                  Committee Votes and Roll Call Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following roll call votes occurred during the Committee's 
consideration of H.R. 3641:


              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the descriptive portions of this report.

             Statement of Performance Goals and Objectives

    Pursuant to clause (3)(c) of rule XIII of the Rules of the 
House of Representatives, the goals of H.R. 3641 are to 
increase civil penalties for violations of the relevant acts 
amendment by H.R. 3641 to deter violations of those statutes.

               New Budget Authority and CBO Cost Estimate

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974, and pursuant to clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following estimate for 
H.R. 3641 from the Director of the Congressional Budget Office:
                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, February 20, 2020.
Hon. Maxine Waters,
Chairwoman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Madam Chairwoman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3641, the Stronger 
Enforcement of Civil Penalties Act of 2019.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Nathaniel 
Frentz.
            Sincerely,
                                             Mark P. Hadley
                                 (For Phillip L. Swagel, Director).
    Enclosure.

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    Bill summary: H.R. 3641 would increase the maximum civil 
monetary penalties that the Securities and Exchange Commission 
(SEC) may order against individuals and companies that violate 
certain securities laws or regulations. In addition to 
increasing the specific penalty amounts, the bill would give 
the SEC the authority, in the case of certain serious 
violations, to order penalties equal to three times the 
pecuniary gain to the violator or equal to the amount of losses 
incurred by the victims. H.R. 3641 would permit the SEC to 
further compound certain penalties ordered against repeat 
violators.
    Estimated Federal cost: The estimated budgetary effect of 
H.R. 3641 is shown in Table 1. The costs of the legislation 
fall within budget function 370 (commerce and housing credit).

                                                   TABLE 1.--ESTIMATED BUDGETARY EFFECTS OF H.R. 3641
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          By fiscal year, millions of dollars--
                                ------------------------------------------------------------------------------------------------------------------------
                                   2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030   2020-2025  2020-2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Increases in Revenues
 
Estimated Revenues.............      185      750      925      925      925      925      925      925      925      925      925      4,635      9,260
 
                                                              Increases in Direct Spending
 
Estimated Budget Authority.....       40       75      185      220      220      220      220      220      220      220      220        960      2,060
Estimated Outlays..............       40       75      185      220      220      220      220      220      220      220      220        960      2,060
 
                                                               Net Decrease in the Deficit
                                                      From Changes in Revenues and Direct Spending
 
Effect on the Deficit..........     -145     -675     -740     -705     -705     -705     -705     -705     -705     -705     -705     -3,675     -7,200
--------------------------------------------------------------------------------------------------------------------------------------------------------
CBO expects that implementing the bill could increase costs for the Securities and Exchange Commission (SEC) by an insignificant amount to collect and
  process the increased penalty collections under H.R. 3641. However, the SEC is authorized to collect fees each year to offset its annual
  appropriation. Assuming appropriation actions consistent with that authority, CBO estimates that any change in discretionary spending would be
  negligible.

    Basis of estimate: CBO assumes that H.R. 3641 will be 
enacted in 2020.
    Revenues: H.R. 3641 would increase the maximum civil 
monetary penalties the SEC could seek for certain violations. 
Under current law, those amounts range from $5,000 to $1 
million, depending on such factors as the type and severity of 
the violation and whether the violator is an individual or 
business. For some violations, the SEC may use a federal court 
action to seek a penalty equal to the gross amount of the 
pecuniary gain to the violator, if that amount is greater than 
the maximum amount enumerated in law.
    H.R. 3641 would increase the maximum amounts for civil 
monetary penalties. Under the bill, those amounts would range 
from $10,000 for lesser violations to $10 million for more 
serious violations. In certain cases, the bill also would give 
the SEC the authority to order penalties equal to three times 
the pecuniary gain to the violator or equal to the amount of 
losses incurred by the victim. H.R. 3641 would permit the SEC 
to further compound penalties ordered against repeat violators.
    CBO treats collections of civil monetary penalties as 
revenues in the federal budget. Using data from the SEC about 
enforcement actions in recent years, CBO estimates that 
enacting H.R. 3641 would increase the collection of civil 
monetary penalties, and thus revenues, by about $9.3 billion 
over the 2020-2030 period.
    Direct spending: Section 308 of the Sarbanes-Oxley Act, 
known as the Fair Fund provision, authorizes the SEC to 
distribute civil monetary penalties to harmed investors. For 
this cost estimate, CBO has displayed distributions of 
additional revenues as direct spending. Based on distribution 
patterns from enforcement actions in recent years, CBO 
estimates that H.R. 3641 would increase outlays by about $1.6 
billion over the 2020-2030 period.
    In addition, the SEC provides monetary awards to 
whistleblowers who report violations that lead to judicial or 
administrative enforcement actions yielding more than $1 
million in penalties. Whistleblowers are eligible to receive 
between 10 percent and 30 percent of any penalties ordered and 
collected. Because civil monetary penalties would increase 
under H.R. 3641, CBO expects that whistleblower awards would 
increase proportionally. CBO estimates that the SEC would pay 
$440 million in additional whistleblower awards over the 2020-
2030 period. Such awards are recorded as direct spending in the 
federal budget.
    In total, CBO expects that enacting H.R. 3641 would 
increase direct spending by about $2.1 billion over the 2020-
2030 period.
    Uncertainty: Because the amount of penalties that the SEC 
orders, collects, and distributes from securities law 
violations is hard to predict and varies from year to year, 
estimating the budgetary effects of H.R. 3641 is uncertain; 
collections could be larger or smaller than CBO estimates. 
Several other factors also could affect the estimated change in 
revenues under the bill, including how frequently the SEC would 
seek the new maximum penalties, how much those larger penalties 
would deter violators, whether the higher amounts would affect 
the SEC's collection rates, and how much the SEC would return 
to harmed investors. In addition, because the amount and timing 
of payments to whistleblowers depends on factors such as the 
number of whistleblowers and the size of awards each year, all 
of which are hard to predict, the total amounts could be larger 
or smaller than CBO estimates.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in Table 2.

    TABLE 2.--CBO'S ESTIMATE OF THE STATUTORY PAY-AS-YOU-GO EFFECTS OF H.R. 3641, THE STRONGER ENFORCEMENT OF CIVIL PENALTIES ACT OF 2019, AS ORDERED
                                         REPORTED BY THE HOUSE COMMITTEE ON FINANCIAL SERVICES ON JULY 16, 2019
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          By fiscal year, millions of dollars--
                                ------------------------------------------------------------------------------------------------------------------------
                                   2020     2021     2022     2023     2024     2025     2026     2027     2028     2029     2030   2020-2025  2020-2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Net Decrease in the Deficit
 
Pay-As-You-Go Effect...........     -145     -675     -740     -705     -705     -705     -705     -705     -705     -705     -705     -3,675     -7,200
Memorandum:
    Changes in Outlays.........       40       75      185      220      220      220      220      220      220      220      220        960      2,060
    Changes in Revenues........      185      750      925      925      925      925      925      925      925      925      925      4,635      9,260
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long-term deficits: None.
    Mandates: If the SEC increased fees to offset the costs 
associated with implementing the bill, H.R. 3641 would increase 
the cost of an existing mandate on private entities required to 
pay those assessments. CBO estimates that the incremental cost 
of the mandate would be below the annual threshold established 
in the Unfunded Mandates Reform Act (UMRA) for private-sector 
mandates ($168 million in 2020, adjusted annually for 
inflation).
    The bill contains no intergovernmental mandates as defined 
in UMRA.
    Estimate prepared by revenues: Nathaniel Frentz; Direct 
Spending: David Hughes; Mandates: Rachel Austin.
    Estimate reviewed by: Joshua Shakin, Chief, Revenue 
Estimating Unit; John McClelland, Director of Tax Analysis; 
Susan Willie, Chief, Public and Private Mandates Unit; Kim 
Cawley, Chief, Natural and Physical Resources Cost Estimates 
Unit; H. Samuel Papenfuss, Deputy Director of Budget Analysis; 
Theresa Gullo, Director of Budget Analysis.

                        Committee Cost Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 3641. 
However, clause 3(d)(2)(B) of that rule provides that this 
requirement does not apply when the committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

                       Unfunded Mandate Statement

    Pursuant to Section 423 of the Congressional Budget and 
Impoundment Control Act (as amended by Section 101(a)(2) of the 
Unfunded Mandates Reform Act, Pub. L. 104-4), the Committee 
adopts as its own the estimate of federal mandates regarding 
H.R. 362, as amended, prepared by the Director of the 
Congressional Budget Office.

                           Advisory Committee

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

              Application of Law to the Legislative Branch

    Pursuant to section 102(b)(3) of the Congressional 
Accountability Act, Pub. L. No. 104-1, H.R. 3641, as amended, 
does not apply to terms and conditions of employment or to 
access to public services or accommodations within the 
legislative branch.

                           Earmark Statement

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 3641 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as described in clauses 9(e), 9(f), and 9(g) of rule 
XXI.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of H.R. 3641 establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
federal program, a program that was included in any report from 
the Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

                        Changes to Existing Law

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, H.R. 3641, as reported, are shown as follows:

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

                         SECURITIES ACT OF 1933

TITLE I--

           *       *       *       *       *       *       *


                      CEASE-AND-DESIST PROCEEDINGS

  Sec. 8A. (a) Authority of the Commission.--If the Commission 
finds, after notice and opportunity for hearing, that any 
person is violating, has violated, or is about to violate any 
provision of this title, or any rule or regulation thereunder, 
the Commission may publish its findings and enter an order 
requiring such person, and any other person that is, was, or 
would be a cause of the violation, due to an act or omission 
the person knew or should have known would contribute to such 
violation, to cease and desist from committing or causing such 
violation and any future violation of the same provision, rule, 
or regulation. Such order may, in addition to requiring a 
person to cease and desist from committing or causing a 
violation, require such person to comply, or to take steps to 
effect compliance, with such provision, rule, or regulation, 
upon such terms and conditions and within such time as the 
Commission may specify in such order. Any such order may, as 
the Commission deems appropriate, require future compliance or 
steps to effect future compliance, either permanently or for 
such period of time as the Commission may specify, with such 
provision, rule, or regulation with respect to any security, 
any issuer, or any other person.
  (b) Hearing.--The notice instituting proceedings pursuant to 
subsection (a) shall fix a hearing date not earlier than 30 
days nor later than 60 days after service of the notice unless 
an earlier or a later date is set by the Commission with the 
consent of any respondent so served.
  (c) Temporary Order.--
          (1) In general.--Whenever the Commission determines 
        that the alleged violation or threatened violation 
        specified in the notice instituting proceedings 
        pursuant to subsection (a), or the continuation 
        thereof, is likely to result in significant dissipation 
        or conversion of assets, significant harm to investors, 
        or substantial harm to the public interest, including, 
        but not limited to, losses to the Securities Investor 
        Protection Corporation, prior to the completion of the 
        proceedings, the Commission may enter a temporary order 
        requiring the respondent to cease and desist from the 
        violation or threatened violation and to take such 
        action to prevent the violation or threatened violation 
        and to prevent dissipation or conversion of assets, 
        significant harm to investors, or substantial harm to 
        the public interest as the Commission deems appropriate 
        pending completion of such proceeding. Such an order 
        shall be entered only after notice and opportunity for 
        a hearing, unless the Commission determines that notice 
        and hearing prior to entry would be impracticable or 
        contrary to the public interest. A temporary order 
        shall become effective upon service upon the respondent 
        and, unless set aside, limited, or suspended by the 
        Commission or a court of competent jurisdiction, shall 
        remain effective and enforceable pending the completion 
        of the proceedings.
          (2) Applicability.--This subsection shall apply only 
        to a respondent that acts, or, at the time of the 
        alleged misconduct acted, as a broker, dealer, 
        investment adviser, investment company, municipal 
        securities dealer, government securities broker, 
        government securities dealer, or transfer agent, or is, 
        or was at the time of the alleged misconduct, an 
        associated person of, or a person seeking to become 
        associated with, any of the foregoing.
  (d) Review of Temporary Orders.--
          (1) Commission review.--At any time after the 
        respondent has been served with a temporary cease-and-
        desist order pursuant to subsection (c), the respondent 
        may apply to the Commission to have the order set 
        aside, limited, or suspended. If the respondent has 
        been served with a temporary cease-and-desist order 
        entered without a prior Commission hearing, the 
        respondent may, within 10 days after the date on which 
        the order was served, request a hearing on such 
        application and the Commission shall hold a hearing and 
        render a decision on such application at the earliest 
        possible time.
          (2) Judicial review.--Within--
                  (A) 10 days after the date the respondent was 
                served with a temporary cease-and-desist order 
                entered with a prior Commission hearing, or
                  (B) 10 days after the Commission renders a 
                decision on an application and hearing under 
                paragraph (1), with respect to any temporary 
                cease-and-desist order entered without a prior 
                Commission hearing,
        the respondent may apply to the United States district 
        court for the district in which the respondent resides 
        or has its principal place of business, or for the 
        District of Columbia, for an order setting aside, 
        limiting, or suspending the effectiveness or 
        enforcement of the order, and the court shall have 
        jurisdiction to enter such an order. A respondent 
        served with a temporary cease-and-desist order entered 
        without a prior Commission hearing may not apply to the 
        court except after hearing and decision by the 
        Commission on the respondent's application under 
        paragraph (1) of this subsection.
          (3) No automatic stay of temporary order.--The 
        commencement of proceedings under paragraph (2) of this 
        subsection shall not, unless specifically ordered by 
        the court, operate as a stay of the Commission's order.
          (4) Exclusive review.--Section 9(a) of this title 
        shall not apply to a temporary order entered pursuant 
        to this section.
  (e) Authority To Enter an Order Requiring an Accounting and 
Disgorgement.--In any cease-and-desist proceeding under 
subsection (a), the Commission may enter an order requiring 
accounting and disgorgement, including reasonable interest. The 
Commission is authorized to adopt rules, regulations, and 
orders concerning payments to investors, rates of interest, 
periods of accrual, and such other matters as it deems 
appropriate to implement this subsection.
  (f) Authority of the Commission to Prohibit Persons From 
Serving as Officers or Directors.--In any cease-and-desist 
proceeding under subsection (a), the Commission may issue an 
order to prohibit, conditionally or unconditionally, and 
permanently or for such period of time as it shall determine, 
any person who has violated section 17(a)(1) 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 the Securities Exchange Act of 1934, 
or that is required to file reports pursuant to section 15(d) 
of that Act, if the conduct of that person demonstrates 
unfitness to serve as an officer or director of any such 
issuer.
  (g) Authority to Impose Money Penalties.--
          (1) Grounds.--In any cease-and-desist proceeding 
        under subsection (a), the Commission may impose a civil 
        penalty on a person if the Commission finds, on the 
        record, after notice and opportunity for hearing, 
        that--
                  (A) such person--
                          (i) is violating or has violated any 
                        provision of this title, or any rule or 
                        regulation issued under this title; or
                          (ii) is or was a cause of the 
                        violation of any provision of this 
                        title, or any rule or regulation 
                        thereunder; and
                  (B) such penalty is in the public interest.
          (2) Maximum amount of penalty.--
                  (A) First tier.--The maximum amount of a 
                penalty for each act or omission described in 
                paragraph (1) shall be [$7,500] $10,000 for a 
                natural person or [$75,000] $100,000 for any 
                other person.
                  (B) Second tier.--Notwithstanding 
                subparagraph (A), the maximum amount of penalty 
                for each such act or omission shall be 
                [$75,000] $100,000 for a natural person or 
                [$375,000] $500,000 for any other person, if 
                the act or omission described in paragraph (1) 
                involved fraud, deceit, manipulation, or 
                deliberate or reckless disregard of a 
                regulatory requirement.
                  [(C) Third tier.--Notwithstanding 
                subparagraphs (A) and (B), the maximum amount 
                of penalty for each such act or omission shall 
                be $150,000 for a natural person or $725,000 
                for any other person, if--
                          [(i) the act or omission described in 
                        paragraph (1) involved fraud, deceit, 
                        manipulation, or deliberate or reckless 
                        disregard of a regulatory requirement; 
                        and
                          [(ii) such act or omission directly 
                        or indirectly resulted in--
                                  [(I) substantial losses or 
                                created a significant risk of 
                                substantial losses to other 
                                persons; or
                                  [(II) substantial pecuniary 
                                gain to the person who 
                                committed the act or omission.]
                  (C) Third tier.--
                          (i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), for a third 
                        tier act or omission, the amount of 
                        penalty for each such act or omission 
                        shall not exceed the greater of--
                                  (I) $1,000,000 for a natural 
                                person or $10,000,000 for any 
                                other person;
                                  (II) 3 times the gross amount 
                                of pecuniary gain to the person 
                                who committed the act or 
                                omission; or
                                  (III) the amount of losses 
                                incurred by victims as a result 
                                of the act or omission.
                          (ii) Third tier act or omission.--For 
                        the purposes of this subparagraph, the 
                        term ``third tier act or omission'' 
                        means an act or omission described in 
                        paragraph (1) that--
                                  (I) involved fraud, deceit, 
                                manipulation, or deliberate or 
                                reckless disregard of a 
                                regulatory requirement; and
                                  (II) directly or indirectly--
                                          (aa) resulted in 
                                        substantial losses to 
                                        other persons;
                                          (bb) created a 
                                        significant risk of 
                                        substantial losses to 
                                        other persons; or
                                          (cc) resulted in 
                                        substantial pecuniary 
                                        gain to the person who 
                                        committed the act or 
                                        omission.
                  (D) Fourth tier.--Notwithstanding 
                subparagraphs (A), (B), and (C), the maximum 
                amount of penalty for each such act or omission 
                shall be 3 times the otherwise applicable 
                amount in such subparagraphs if, within the 5-
                year period preceding such act or omission, the 
                person who committed the act or omission was 
                criminally convicted for securities fraud or 
                became subject to a judgment or order imposing 
                monetary, equitable, or administrative relief 
                in any Commission action alleging fraud by that 
                person.
          (3) Evidence concerning ability to pay.--In any 
        proceeding in which the Commission may impose a penalty 
        under this section, a respondent may present evidence 
        of the ability of the respondent to pay such penalty. 
        The Commission may, in its discretion, consider such 
        evidence in determining whether such penalty is in the 
        public interest. Such evidence may relate to the extent 
        of the ability of the respondent to continue in 
        business and the collectability of a penalty, taking 
        into account any other claims of the United States or 
        third parties upon the assets of the respondent and the 
        amount of the assets of the respondent.

           *       *       *       *       *       *       *


                injunctions and prosecution of offenses

  Sec. 20. (a) Whenever it shall appear to the Commission, 
either upon complaint or otherwise, that the provisions of this 
title, or of any rule or regulation prescribed under authority 
thereof, have been or are about to be violated, it may, in its 
discretion, either require or permit such person to file with 
it a statement in writing, under oath, or otherwise, as to all 
the facts and circumstances concerning the subject matter which 
it believes to be in the public interest to investigate, and 
may investigate such facts.
  (b) Whenever it shall appear to the Commission that any 
person is engaged or about to engage in any acts or practices 
which constitute or will constitute a violation of the 
provisions of this title, or of any rule or regulation 
prescribed under authority thereof, the Commission may, in its 
discretion, bring an action in any district court of the United 
States, or United States court of any Territory, 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 to the Attorney 
General who may, in his discretion, institute the necessary 
criminal proceedings under this title. Any such criminal 
proceeding may be brought either in the district wherein the 
transmittal of the prospectus or security complained of begins, 
or in the district wherein such prospectus or security is 
received.
  (c) Upon application of the Commission, the district courts 
of the United States and the United States courts of any 
Territory shall have jurisdiction to issue writs of mandamus 
commanding any person to comply with the provisions of this 
title or any order of the Commission made in pursuance thereof.
  (d) Money Penalties in Civil Actions.--
          (1) Authority of commission.--Whenever it shall 
        appear to the Commission that any person has violated 
        any provision of this title, the rules or regulations 
        thereunder, a Federal court injunction or a bar 
        obtained or entered by the Commission under this title, 
        or a cease-and-desist order entered by the Commission 
        pursuant to section 8A of this title, other than by 
        committing a violation subject to a penalty pursuant to 
        section 21A of the Securities Exchange Act of 1934, the 
        Commission may bring an action in a United States 
        district court to seek, and the court shall have 
        jurisdiction to impose, upon a proper showing, a civil 
        penalty to be paid by the person who committed such 
        violation.
          (2) Amount of penalty.--
                  (A) First tier.--The amount of the penalty 
                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] $10,000 for 
                a natural person or [$50,000] $100,000 for any 
                other person, or (ii) the gross amount of 
                pecuniary gain to such defendant as a result of 
                the violation.
                  (B) Second tier.--Notwithstanding 
                subparagraph (A), the amount of penalty for 
                each such violation shall not exceed the 
                greater of (i) [$50,000] $100,000 for a natural 
                person or [$250,000] $500,000 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 
                paragraph (1) involved fraud, deceit, 
                manipulation, or deliberate or reckless 
                disregard of a regulatory requirement.
                  [(C) Third tier.--Notwithstanding 
                subparagraphs (A) and (B), the amount of 
                penalty for each such violation 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--
                          [(I) the violation described in 
                        paragraph (1) involved fraud, deceit, 
                        manipulation, or deliberate or reckless 
                        disregard of a regulatory requirement; 
                        and
                          [(II) such violation directly or 
                        indirectly resulted in substantial 
                        losses or created a significant risk of 
                        substantial losses to other persons.]
                  (C) Third tier.--
                          (i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), for a third 
                        tier violation, the amount of penalty 
                        for each violation shall not exceed the 
                        greater of--
                                  (I) $1,000,000 for a natural 
                                person or $10,000,000 for any 
                                other person;
                                  (II) 3 times the gross amount 
                                of pecuniary gain to the person 
                                who committed the violation; or
                                  (III) the amount of losses 
                                incurred by victims as a result 
                                of the violation.
                          (ii) Third tier violation.--For the 
                        purposes of this subparagraph, the term 
                        ``third tier violation'' means a 
                        violation described in paragraph (1) 
                        that--
                                  (I) involved fraud, deceit, 
                                manipulation, or deliberate or 
                                reckless disregard of a 
                                regulatory requirement; and
                                  (II) directly or indirectly--
                                          (aa) resulted in 
                                        substantial losses to 
                                        other persons;
                                          (bb) created a 
                                        significant risk of 
                                        substantial losses to 
                                        other persons; or
                                          (cc) resulted in 
                                        substantial pecuniary 
                                        gain to the person who 
                                        committed the 
                                        violation.
                  (D) Fourth tier.--Notwithstanding 
                subparagraphs (A), (B), and (C), the maximum 
                amount of penalty for each such violation shall 
                be 3 times the otherwise applicable amount in 
                such subparagraphs if, within the 5-year period 
                preceding such violation, the defendant was 
                criminally convicted for securities fraud or 
                became subject to a judgment or order imposing 
                monetary, equitable, or administrative relief 
                in any Commission action alleging fraud by that 
                defendant.
          (3) Procedures for collection.--
                  (A) Payment of penalty to treasury.--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 the Securities Exchange Act of 1934.
                  (B) Collection of penalties.--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.
                  (C) Remedy not exclusive.--The actions 
                authorized by this subsection may be brought in 
                addition to any other action that the 
                Commission or the Attorney General is entitled 
                to bring.
                  (D) Jurisdiction and venue.--For purposes of 
                section 22 of this title, actions under this 
                section shall be actions to enforce a liability 
                or a duty created by this title.
          [(4) Special provisions relating to a violation of a 
        cease-and-desist order.--In an action to enforce a 
        cease-and-desist order entered by the Commission 
        pursuant to section 8A, 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 such an order, each day of the failure to 
        comply with the order shall be deemed a separate 
        offense.]
          (4) Special provisions relating to a violation of an 
        injunction or certain orders.--
                  (A) In general.--Each separate violation of 
                an injunction or order described in 
                subparagraph (B) shall be a separate offense, 
                except that in the case of a violation through 
                a continuing failure to comply with such 
                injunction or order, each day of the failure to 
                comply with the injunction or order shall be 
                deemed a separate offense.
                  (B) Injunctions and orders.--Subparagraph (A) 
                shall apply with respect to any action to 
                enforce--
                          (i) a Federal court injunction 
                        obtained pursuant to this title;
                          (ii) an order entered or obtained by 
                        the Commission pursuant to this title 
                        that bars, suspends, places limitations 
                        on the activities or functions of, or 
                        prohibits the activities of a person; 
                        or
                          (iii) a cease-and-desist order 
                        entered by the Commission pursuant to 
                        section 8A.
  (e) Authority of a Court To Prohibit Persons From Serving as 
Officers and Directors.--In any proceeding under subsection 
(b), the court may prohibit, conditionally or unconditionally, 
and permanently or for such period of time as it shall 
determine, any person who violated section 17(a)(1) of this 
title from acting as an officer or director of any issuer that 
has a class of securities registered pursuant to section 12 of 
the Securities Exchange Act of 1934 or that is required to file 
reports pursuant to section 15(d) of such Act if the person's 
conduct demonstrates unfitness to serve as an officer or 
director of any such issuer.
  (f) Prohibition of Attorneys' Fees Paid From Commission 
Disgorgement Funds.--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 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.
  (g) Authority of a Court To Prohibit Persons From 
Participating in an Offering of Penny Stock.--
          (1) In general.--In any proceeding under subsection 
        (a) against any person participating in, or, at the 
        time of 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.
          (2) Definition.--For purposes of this subsection, 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.

           *       *       *       *       *       *       *

                              ----------                              


                    SECURITIES EXCHANGE ACT OF 1934

TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *


        investigations; injunctions and prosecution of offenses

  Sec. 21. (a)(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.
  (b) 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, subpoena 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.
  (c) In case of contumacy by, or refusal to obey a subpoena 
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 subpoena 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.
  (d)(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, 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.
  (2) Authority of a Court To Prohibit Persons From Serving as 
Officers and Directors.--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.
  (3) Money Penalties in Civil Actions.--
          (A) Authority of commission.--Whenever it shall 
        appear to the Commission that any person has violated 
        any provision of this title, the rules or regulations 
        thereunder, a Federal court injunction or a bar 
        obtained or entered by the Commission under this title, 
        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 impose, upon a proper 
        showing, a civil penalty to be paid by the person who 
        committed such violation.
          (B) Amount of penalty.--
                  (i) First tier.--The amount of the penalty 
                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] $10,000 for 
                a natural person or [$50,000] $100,000 for any 
                other person, or (II) the gross amount of 
                pecuniary gain to such defendant as a result of 
                the violation.
                  (ii) Second tier.--Notwithstanding clause 
                (i), the amount of penalty for each such 
                violation shall not exceed the greater of (I) 
                [$50,000] $100,000 for a natural person or 
                [$250,000] $500,000 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) Third tier.--Notwithstanding clauses 
                (i) and (ii), the amount of penalty for each 
                such violation 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 
                        subparagraph (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 
                        substantial losses to other persons.]
                  (iii) Third tier.--
                          (I) In general.--Notwithstanding 
                        clauses (i) and (ii), for a third tier 
                        violation, the amount of penalty for 
                        each such violation shall not exceed 
                        the greater of--
                                  (aa) $1,000,000 for a natural 
                                person or $10,000,000 for any 
                                other person;
                                  (bb) 3 times the gross amount 
                                of pecuniary gain to the person 
                                who committed the violation; or
                                  (cc) the amount of losses 
                                incurred by victims as a result 
                                of the violation.
                          (II) Third tier violation.--For the 
                        purposes of this clause, the term 
                        ``third tier violation'' means a 
                        violation described in subparagraph (A) 
                        that--
                                  (aa) involved fraud, deceit, 
                                manipulation, or deliberate or 
                                reckless disregard of a 
                                regulatory requirement; and
                                  (bb) directly or indirectly--
                                          (AA) resulted in 
                                        substantial losses to 
                                        other persons;
                                          (BB) created a 
                                        significant risk of 
                                        substantial losses to 
                                        other persons; or
                                          (CC) resulted in 
                                        substantial pecuniary 
                                        gain to the person who 
                                        committed the 
                                        violation.
                  (iv) Fourth tier.--Notwithstanding clauses 
                (i), (ii), and (iii), the maximum amount of 
                penalty for each such violation shall be 3 
                times the otherwise applicable amount in such 
                clauses if, within the 5-year period preceding 
                such violation, the defendant was criminally 
                convicted for securities fraud or became 
                subject to a judgment or order imposing 
                monetary, equitable, or administrative relief 
                in any Commission action alleging fraud by that 
                defendant.
          (C) Procedures for collection.--
                  (i) Payment of penalty to treasury.--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) Collection of penalties.--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) Remedy not exclusive.--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) Jurisdiction and venue.--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.
          [(D) Special provisions relating to a violation of a 
        cease-and-desist order.--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.]
          (D) Special provisions relating to a violation of an 
        injunction or certain orders.--
                  (i) In general.--Each separate violation of 
                an injunction or order described in clause (ii) 
                shall be a separate offense, except that in the 
                case of a violation through a continuing 
                failure to comply with such injunction or 
                order, each day of the failure to comply with 
                the injunction or order shall be deemed a 
                separate offense.
                  (ii) Injunctions and orders.--Clause (i) 
                shall apply with respect to an action to 
                enforce--
                          (I) a Federal court injunction 
                        obtained pursuant to this title;
                          (II) an order entered or obtained by 
                        the Commission pursuant to this title 
                        that bars, suspends, places limitations 
                        on the activities or functions of, or 
                        prohibits the activities of a person; 
                        or
                          (III) a cease-and-desist order 
                        entered by the Commission pursuant to 
                        section 21C.
          (4) Prohibition of attorneys' fees paid from 
        commission disgorgement funds.--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 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) Equitable Relief.--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) Authority of a court to prohibit persons from 
participating in an offering of penny stock.--
          (A) In general.--In any proceeding under paragraph 
        (1) against any person participating in, or, at the 
        time of 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) Definition.--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.
  (e) 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 public 
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.
  (f) 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 person 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.
  (g) 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.
  (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 subpoena 
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.
  (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) 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.
  (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.
  (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.
  (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.
  (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).

           *       *       *       *       *       *       *


              CIVIL REMEDIES IN ADMINISTRATIVE PROCEEDINGS

  Sec. 21B. (a) Commission Authority To Assess Money 
Penalties.--
          (1) In general.--In any proceeding instituted 
        pursuant to sections 15(b)(4), 15(b)(6), 15D, 15B, 15C, 
        15E, or 17A of this title against any person, the 
        Commission or the appropriate regulatory agency may 
        impose a civil penalty if it finds, on the record after 
        notice and opportunity for hearing, that such penalty 
        is in the public interest and that such person--
                  (A) has willfully violated any provision of 
                the Securities Act of 1933, the Investment 
                Company Act of 1940, the Investment Advisers 
                Act of 1940, or this title, or the rules or 
                regulations thereunder, or the rules of the 
                Municipal Securities Rulemaking Board;
                  (B) has willfully aided, abetted, counseled, 
                commanded, induced, or procured such a 
                violation by any other person;
                  (C) has willfully made or caused to be made 
                in any application for registration or report 
                required to be filed with the Commission or 
                with any other appropriate regulatory agency 
                under this title, or in any proceeding before 
                the Commission with respect to registration, 
                any statement which was, at the time and in the 
                light of the circumstances under which it was 
                made, false or misleading with respect to any 
                material fact, or has omitted to state in any 
                such application or report any material fact 
                which is required to be stated therein; or
                  (D) has failed reasonably to supervise, 
                within the meaning of section 15(b)(4)(E) of 
                this title, with a view to preventing 
                violations of the provisions of such statutes, 
                rules and regulations, another person who 
                commits such a violation, if such other person 
                is subject to his supervision;
          (2) Cease-and-desist proceedings.--In any proceeding 
        instituted under section 21C against any person, the 
        Commission may impose a civil penalty, if the 
        Commission finds, on the record after notice and 
        opportunity for hearing, that such person--
                  (A) is violating or has violated any 
                provision of this title, or any rule or 
                regulation issued under this title; or
                  (B) is or was a cause of the violation of any 
                provision of this title, or any rule or 
                regulation issued under this title.
  (b) Maximum Amount of Penalty.--
          (1) First tier.--The maximum amount of penalty for 
        each act or omission described in subsection (a) shall 
        be [$5,000] $10,000 for a natural person or [$50,000] 
        $100,000 for any other person.
          (2) Second tier.--Notwithstanding paragraph (1), the 
        maximum amount of penalty for each such act or omission 
        shall be [$50,000] $100,000 for a natural person or 
        [$250,000] $500,000 for any other person if the act or 
        omission described in subsection (a) involved fraud, 
        deceit, manipulation, or deliberate or reckless 
        disregard of a regulatory requirement.
          [(3) Third tier.--Notwithstanding paragraphs (1) and 
        (2), the maximum amount of penalty for each such act or 
        omission shall be $100,000 for a natural person or 
        $500,000 for any other person if--
                  [(A) the act or omission described in 
                subsection (a) involved fraud, deceit, 
                manipulation, or deliberate or reckless 
                disregard of a regulatory requirement; and
                  [(B) such act or omission directly or 
                indirectly resulted in substantial losses or 
                created a significant risk of substantial 
                losses to other persons or resulted in 
                substantial pecuniary gain to the person who 
                committed the act or omission.]
          (3) Third tier.--
                  (A) In general.--Notwithstanding paragraphs 
                (1) and (2), for a third tier act or omission, 
                the amount of penalty for each such act or 
                omission shall not exceed the greater of--
                          (i) $1,000,000 for a natural person 
                        or $10,000,000 for any other person;
                          (ii) 3 times the gross amount of 
                        pecuniary gain to the person who 
                        committed the act or omission; or
                          (iii) the amount of losses incurred 
                        by victims as a result of the act or 
                        omission.
                  (B) Third tier act or omission.--For the 
                purposes of this paragraph, the term ``third 
                tier act or omission'' means an act or omission 
                described in paragraph (1) that--
                          (i) involved fraud, deceit, 
                        manipulation, or deliberate or reckless 
                        disregard of a regulatory requirement; 
                        and
                          (ii) directly or indirectly--
                                  (I) resulted in substantial 
                                losses to other persons;
                                  (II) created a significant 
                                risk of substantial losses to 
                                other persons; or
                                  (III) resulted in substantial 
                                pecuniary gain to the person 
                                who committed the act or 
                                omission.
          (4) Fourth tier.--Notwithstanding paragraphs (1), 
        (2), and (3), the maximum amount of penalty for each 
        such act or omission shall be 3 times the otherwise 
        applicable amount in such paragraphs if, within the 5-
        year period preceding such act or omission, the person 
        who committed the act or omission was criminally 
        convicted for securities fraud or became subject to a 
        judgment or order imposing monetary, equitable, or 
        administrative relief in any Commission action alleging 
        fraud by that person.
  (c) Determination of Public Interest.--In considering under 
this section whether a penalty is in the public interest, the 
Commission or the appropriate regulatory agency may consider--
          (1) whether the act or omission for which such 
        penalty is assessed involved fraud, deceit, 
        manipulation, or deliberate or reckless disregard of a 
        regulatory requirement;
          (2) the harm to other persons resulting either 
        directly or indirectly from such act or omission;
          (3) the extent to which any person was unjustly 
        enriched, taking into account any restitution made to 
        persons injured by such behavior;
          (4) whether such person previously has been found by 
        the Commission, another appropriate regulatory agency, 
        or a self-regulatory organization to have violated the 
        Federal securities laws, State securities laws, or the 
        rules of a self-regulatory organization, has been 
        enjoined by a court of competent jurisdiction from 
        violations of such laws or rules, or has been convicted 
        by a court of competent jurisdiction of violations of 
        such laws or of any felony or misdemeanor described in 
        section 15(b)(4)(B) of this title;
          (5) the need to deter such person and other persons 
        from committing such acts or omissions; and
          (6) such other matters as justice may require.
  (d) Evidence Concerning Ability To Pay.--In any proceeding in 
which the Commission or the appropriate regulatory agency may 
impose a penalty under this section, a respondent may present 
evidence of the respondent's ability to pay such penalty. The 
Commission or the appropriate regulatory agency may, in its 
discretion, consider such evidence in determining whether such 
penalty is in the public interest. Such evidence may relate to 
the extent of such person's ability to continue in business and 
the collectability of a penalty, taking into account any other 
claims of the United States or third parties upon such person's 
assets and the amount of such person's assets.
  (e) Authority To Enter an Order Requiring an Accounting and 
Disgorgement.--In any proceeding in which the Commission or the 
appropriate regulatory agency may impose a penalty under this 
section, the Commission or the appropriate regulatory agency 
may enter an order requiring accounting and disgorgement, 
including reasonable interest. The Commission is authorized to 
adopt rules, regulations, and orders concerning payments to 
investors, rates of interest, periods of accrual, and such 
other matters as it deems appropriate to implement this 
subsection.
  (f) Security-based Swaps.--
          (1) Clearing agency.--Any clearing agency that 
        knowingly or recklessly evades or participates in or 
        facilitates an evasion of the requirements of section 
        3C shall be liable for a civil money penalty in twice 
        the amount otherwise available for a violation of 
        section 3C.
          (2) Security-based swap dealer or major security-
        based swap participant.--Any security-based swap dealer 
        or major security-based swap participant that knowingly 
        or recklessly evades or participates in or facilitates 
        an evasion of the requirements of section 3C shall be 
        liable for a civil money penalty in twice the amount 
        otherwise available for a violation of section 3C.

           *       *       *       *       *       *       *

                              ----------                              


                     INVESTMENT COMPANY ACT OF 1940



           *       *       *       *       *       *       *
TITLE I--INVESTMENT COMPANIES

           *       *       *       *       *       *       *


      ineligibility of certain affiliated persons and underwriters

  Sec. 9. (a) It shall be unlawful for any of the following 
persons to serve or act in the capacity of employee, officer, 
director, member of an advisory board, investment adviser, or 
depositor of any registered investment company, or principal 
underwriter for any registered open-end company, registered 
unit investment trust, or registered face-amount certificate 
company:
          (1) any person who within 10 years has been convicted 
        of any felony or misdemeanor involving the purchase or 
        sale of any security or arising out of such person's 
        conduct as an underwriter, broker, dealer, investment 
        adviser, municipal securities dealer, government 
        securities broker, government securities dealer, bank, 
        transfer agent, credit rating agency, or entity or 
        person required to be registered under the Commodity 
        Exchange Act, or as an affiliated person, salesman, or 
        employee of any investment company, bank, insurance 
        company, or entity or person required to be registered 
        under the Commodity Exchange Act;
          (2) any person who, by reason of any misconduct, is 
        permanently or temporarily enjoined by order, judgment, 
        or decree of any court of competent jurisdiction from 
        acting as an underwriter, broker, dealer, investment 
        adviser, municipal securities dealer, government 
        securities broker, government securities dealer, bank, 
        transfer agent, credit rating agency, or entity or 
        person required to be registered under the Commodity 
        Exchange Act, or as an affiliated person, salesman, or 
        employee of any investment company, bank, insurance 
        company, or entity or person required to be registered 
        under the Commodity Exchange Act, or from engaging in 
        or continuing any conduct or practice in connection 
        with any such activity or in connection with the 
        purchase or sale of any security; or
          (3) a company any affiliated person of which is 
        ineligible, by reason of paragraph (1) or (2), to serve 
        or act in the foregoing capacities.
For the purposes of paragraphs (1), (2), and (3) of this 
subsection, the term ``investment adviser'' shall include an 
investment adviser as defined in title II of this Act.
  (b) The Commission may, after notice and opportunity for 
hearing, by order prohibit, conditionally or unconditionally, 
either permanently or for such period of time as it in its 
discretion shall deem appropriate in the public interest, any 
person from serving or acting as an employee, officer, 
director, member of an advisory board, investment adviser or 
depositor of, or principal underwriter for, a registered 
investment company or affiliated person of such investment 
adviser, depositor, or principal underwriter, if such person--
          (1) has willfully made or caused to be made in any 
        registration statement, application or report filed 
        with the Commission under this title any statement 
        which was at the time and in the light of the 
        circumstances under which it was made false or 
        misleading with respect to any material fact, or has 
        omitted to state in any such registration statement, 
        application, or report any material fact which was 
        required to be stated therein;
          (2) has willfully violated any provision of the 
        Securities Act of 1933, or of the Securities Exchange 
        Act of 1934, or of title II of this Act, or of this 
        title, or of the Commodity Exchange Act, or of any rule 
        or regulation under any of such statutes;
          (3) has willfully aided, abetted, counseled, 
        commanded, induced, or procured the violation by any 
        other person of the Securities Act of 1933, or of the 
        Securities Exchange Act of 1934, or of title II of this 
        Act, or of this title, or of the Commodity Exchange 
        Act, or of any rule or regulation under any of such 
        statutes;
          (4) has been found by a foreign financial regulatory 
        authority to have--
                  (A) made or caused to be made in any 
                application for registration or report required 
                to be filed with a foreign securities 
                authority, or in any proceeding before a 
                foreign securities authority with respect to 
                registration, any statement that was at the 
                time and in light of the circumstances under 
                which it was made false or misleading with 
                respect to any material fact, or has omitted to 
                state in any application or report to a foreign 
                securities authority any material fact that is 
                required to be stated therein;
                  (B) violated any foreign statute or 
                regulation regarding transactions in securities 
                or contracts of sale of a commodity for future 
                delivery traded on or subject to the rules of a 
                contract market or any board of trade; or
                  (C) aided, abetted, counseled, commanded, 
                induced, or procured the violation by any other 
                person of any foreign statute or regulation 
                regarding transactions in securities or 
                contracts of sale of a commodity for future 
                delivery traded on or subject to the rules of a 
                contract market or any board of trade;
          (5) within 10 years has been convicted by a foreign 
        court of competent jurisdiction of a crime, however 
        denominated by the laws of the relevant foreign 
        government, that is substantially equivalent to an 
        offense set forth in paragraph (1) of subsection (a); 
        or
          (6) by reason of any misconduct, is temporarily or 
        permanently enjoined by any foreign court of competent 
        jurisdiction from acting in any of the capacities, set 
        forth in paragraph (2) of subsection (a), or a 
        substantially equivalent foreign capacity, or from 
        engaging in or continuing any conduct or practice in 
        connection with any such activity or in connection with 
        the purchase or sale of any security.
  (c) Any person who is ineligible, by reason of subsection 
(a), to serve or act in the capacities enumerated in that 
subsection, may file with the Commission an application for an 
exemption from the provisions of that subsection. The 
Commission shall by order grant such application, either 
unconditionally or on an appropriate temporary or other 
conditional basis, if it is established that the prohibitions 
of subsection (a), as applied to such person, are unduly or 
disproportionately severe or that the conduct of such person 
has been such as not to make it against the public interest or 
protection of investors to grant such application.
  (d) Money Penalties in Administrative Proceedings.--
          (1) Authority of commission.--
                  (A) In general.--In any proceeding instituted 
                pursuant to subsection (b) against any person, 
                the Commission may impose a civil penalty if it 
                finds, on the record after notice and 
                opportunity for hearing, that such penalty is 
                in the public interest, and that such person--
                          (i) has willfully violated any 
                        provision of the Securities Act of 
                        1933, the Securities Exchange Act of 
                        1934, the Investment Advisers Act of 
                        1940, or this title, or the rules or 
                        regulations thereunder;
                          (ii) has willfully aided, abetted, 
                        counseled, commanded, induced, or 
                        procured such a violation by any other 
                        person; or
                          (iii) has willfully made or caused to 
                        be made in any registration statement, 
                        application, or report required to be 
                        filed with the Commission under this 
                        title, any statement which was, at the 
                        time and in the light of the 
                        circumstances under which it was made, 
                        false or misleading with respect to any 
                        material fact, or has omitted to state 
                        in any such registration statement, 
                        application, or report any material 
                        fact which was required to be stated 
                        therein;
                  (B) Cease-and-desist proceedings.--In any 
                proceeding instituted pursuant to subsection 
                (f) against any person, the Commission may 
                impose a civil penalty if the Commission finds, 
                on the record, after notice and opportunity for 
                hearing, that such person--
                          (i) is violating or has violated any 
                        provision of this title, or any rule or 
                        regulation issued under this title; or
                          (ii) is or was a cause of the 
                        violation of any provision of this 
                        title, or any rule or regulation issued 
                        under this title.
          (2) Maximum amount of penalty.--
                  (A) First tier.--The maximum amount of 
                penalty for each act or omission described in 
                paragraph (1) shall be [$5,000] $10,000 for a 
                natural person or [$50,000] $100,000 for any 
                other person.
                  (B) Second tier.--Notwithstanding 
                subparagraph (A), the maximum amount of penalty 
                for each such act or omission shall be 
                [$50,000] $100,000 for a natural person or 
                [$250,000] $500,000 for any other person if the 
                act or omission described in paragraph (1) 
                involved fraud, deceit, manipulation, or 
                deliberate or reckless disregard of a 
                regulatory requirement.
                  [(C) Third tier.--Notwithstanding 
                subparagraphs (A) and (B), the maximum amount 
                of penalty for each such act or omission shall 
                be $100,000 for a natural person or $500,000 
                for any other person if--
                          [(i) the act or omission described in 
                        paragraph (1) involved fraud, deceit, 
                        manipulation, or deliberate or reckless 
                        disregard of a regulatory requirement; 
                        and
                          [(ii) such act or omission directly 
                        or indirectly resulted in substantial 
                        losses or created a significant risk of 
                        substantial losses to other persons or 
                        resulted in substantial pecuniary gain 
                        to the person who committed the act or 
                        omission.]
                  (C) Third tier.--
                          (i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), for a third 
                        tier act or omission, the amount of 
                        penalty for each such act or omission 
                        shall not exceed the greater of--
                                  (I) $1,000,000 for a natural 
                                person or $10,000,000 for any 
                                other person;
                                  (II) 3 times the gross amount 
                                of pecuniary gain to the person 
                                who committed the act or 
                                omission; or
                                  (III) the amount of losses 
                                incurred by victims as a result 
                                of the act or omission.
                          (ii) Third tier act or omission.--For 
                        the purposes of this subparagraph, the 
                        term ``third tier act or omission'' 
                        means an act or omission described in 
                        paragraph (1) that--
                                  (I) involved fraud, deceit, 
                                manipulation, or deliberate or 
                                reckless disregard of a 
                                regulatory requirement; and
                                  (II) directly or indirectly--
                                          (aa) resulted in 
                                        substantial losses to 
                                        other persons;
                                          (bb) created a 
                                        significant risk of 
                                        substantial losses to 
                                        other persons; or
                                          (cc) resulted in 
                                        substantial pecuniary 
                                        gain to the person who 
                                        committed the act or 
                                        omission.
                  (D) Fourth tier.--Notwithstanding 
                subparagraphs (A), (B), and (C), the maximum 
                amount of penalty for each such act or omission 
                shall be 3 times the otherwise applicable 
                amount in such subparagraphs if, within the 5-
                year period preceding such act or omission, the 
                person who committed the act or omission was 
                criminally convicted for securities fraud or 
                became subject to a judgment or order imposing 
                monetary, equitable, or administrative relief 
                in any Commission action alleging fraud by that 
                person.
          (3) Determination of public interest.--In considering 
        under this section whether a penalty is in the public 
        interest, the Commission may consider--
                  (A) whether the act or omission for which 
                such penalty is assessed involved fraud, 
                deceit, manipulation, or deliberate or reckless 
                disregard of a regulatory requirement;
                  (B) the harm to other persons resulting 
                either directly or indirectly from such act or 
                omission;
                  (C) the extent to which any person was 
                unjustly enriched, taking into account any 
                restitution made to persons injured by such 
                behavior;
                  (D) whether such person previously has been 
                found by the Commission, another appropriate 
                regulatory agency, or a self-regulatory 
                organization to have violated the Federal 
                securities laws, State securities laws, or the 
                rules of a self-regulatory organization, has 
                been enjoined by a court of competent 
                jurisdiction from violations of such laws or 
                rules, or has been convicted by a court of 
                competent jurisdiction of violations of such 
                laws or of any felony or misdemeanor described 
                in section 203(e)(2) of the Investment Advisers 
                Act of 1940;
                  (E) the need to deter such person and other 
                persons from committing such acts or omissions; 
                and
                  (F) such other matters as justice may 
                require.
          (4) Evidence concerning ability to pay.--In any 
        proceeding in which the Commission may impose a penalty 
        under this section, a respondent may present evidence 
        of the respondent's ability to pay such penalty. The 
        Commission may, in its discretion, consider such 
        evidence in determining whether such penalty is in the 
        public interest. Such evidence may relate to the extent 
        of such person's ability to continue in business and 
        the collectability of a penalty, taking into account 
        any other claims of the United States or third parties 
        upon such person's assets and the amount of such 
        person's assets.
  (e) Authority To Enter an Order Requiring an Accounting and 
Disgorgement.--In any proceeding in which the Commission may 
impose a penalty under this section, the Commission may enter 
an order requiring accounting and disgorgement, including 
reasonable interest. The Commission is authorized to adopt 
rules, regulations, and orders concerning payments to 
investors, rates of interest, periods of accrual, and such 
other matters as it deems appropriate to implement this 
subsection.
  (f) Cease-and-Desist Proceedings.--
          (1) Authority of the commission.--If the Commission 
        finds, after notice and opportunity for hearing, that 
        any person is violating, has violated, or is about to 
        violate any provision of this title, or any rule or 
        regulation thereunder, the Commission may publish its 
        findings and enter an order requiring such person, and 
        any other person that is, was, or would be a cause of 
        the violation, due to an act or omission the person 
        knew or should have known would contribute to such 
        violation, to cease and desist from committing or 
        causing such violation and any future violation of the 
        same provision, rule, or regulation. Such order may, in 
        addition to requiring a person to cease and desist from 
        committing or causing a violation, require such person 
        to comply, or to take steps to effect compliance, with 
        such provision, rule, or regulation, upon such terms 
        and conditions and within such time as the Commission 
        may specify in such order. Any such order may, as the 
        Commission deems appropriate, require future compliance 
        or steps to effect future compliance, either 
        permanently or for such period of time as the 
        Commission may specify, with such provision, rule, or 
        regulation with respect to any security, any issuer, or 
        any other person.
          (2) Hearing.--The notice instituting proceedings 
        pursuant to paragraph (1) shall fix a hearing date not 
        earlier than 30 days nor later than 60 days after 
        service of the notice unless an earlier or a later date 
        is set by the Commission with the consent of any 
        respondent so served.
          (3) Temporary order.--
                  (A) In general.--Whenever the Commission 
                determines that the alleged violation or 
                threatened violation specified in the notice 
                instituting proceedings pursuant to paragraph 
                (1), or the continuation thereof, is likely to 
                result in significant dissipation or conversion 
                of assets, significant harm to investors, or 
                substantial harm to the public interest, 
                including, but not limited to, losses to the 
                Securities Investor Protection Corporation, 
                prior to the completion of the proceeding, the 
                Commission may enter a temporary order 
                requiring the respondent to cease and desist 
                from the violation or threatened violation and 
                to take such action to prevent the violation or 
                threatened violation and to prevent dissipation 
                or conversion of assets, significant harm to 
                investors, or substantial harm to the public 
                interest as the Commission deems appropriate 
                pending completion of such proceedings. Such an 
                order shall be entered only after notice and 
                opportunity for a hearing, unless the 
                Commission, notwithstanding section 40(a) of 
                this title, determines that notice and hearing 
                prior to entry would be impracticable or 
                contrary to the public interest. A temporary 
                order shall become effective upon service upon 
                the respondent and, unless set aside, limited, 
                or suspended by the Commission or a court of 
                competent jurisdiction, shall remain effective 
                and enforceable pending the completion of the 
                proceedings.
                  (B) Applicability.--This paragraph shall 
                apply only to a respondent that acts, or, at 
                the time of the alleged misconduct acted, as a 
                broker, dealer, investment adviser, investment 
                company, municipal securities dealer, 
                government securities broker, government 
                securities dealer, or transfer agent, or is, or 
                was at the time of the alleged misconduct, an 
                associated person of, or a person seeking to 
                become associated with, any of the foregoing.
          (4) Review of temporary orders.--
                  (A) Commission review.--At any time after the 
                respondent has been served with a temporary 
                cease-and-desist order pursuant to paragraph 
                (3), the respondent may apply to the Commission 
                to have the order set aside, limited, or 
                suspended. If the respondent has been served 
                with a temporary cease-and-desist order entered 
                without a prior Commission hearing, the 
                respondent may, within 10 days after the date 
                on which the order was served, request a 
                hearing on such application and the Commission 
                shall hold a hearing and render a decision on 
                such application at the earliest possible time.
                  (B) Judicial review.--Within--
                          (i) 10 days after the date the 
                        respondent was served with a temporary 
                        cease-and-desist order entered with a 
                        prior Commission hearing, or
                          (ii) 10 days after the Commission 
                        renders a decision on an application 
                        and hearing under subparagraph (A), 
                        with respect to any temporary cease-
                        and-desist order entered without a 
                        prior Commission hearing,
                the respondent may apply to the United States 
                district court for the district in which the 
                respondent resides or has its principal place 
                of business, or for the District of Columbia, 
                for an order setting aside, limiting, or 
                suspending the effectiveness or enforcement of 
                the order, and the court shall have 
                jurisdiction to enter such an order. A 
                respondent served with a temporary cease-and-
                desist order entered without a prior Commission 
                hearing may not apply to the court except after 
                hearing and decision by the Commission on the 
                respondent's application under subparagraph (A) 
                of this paragraph.
                  (C) No automatic stay of temporary order.--
                The commencement of proceedings under 
                subparagraph (B) of this paragraph shall not, 
                unless specifically ordered by the court, 
                operate as a stay of the Commission's order.
                  (D) Exclusive review.--Section 43 of this 
                title shall not apply to a temporary order 
                entered pursuant to this section.
          (5) Authority to enter an order requiring an 
        accounting and disgorgement.--In any cease-and-desist 
        proceeding under subsection (f)(1), the Commission may 
        enter an order requiring accounting and disgorgement, 
        including reasonable interest. The Commission is 
        authorized to adopt rules, regulations, and orders 
        concerning payments to investors, rates of interest, 
        periods of accrual, and such other matters as it deems 
        appropriate to implement this subsection.
  (g) For the purposes of this section, the term ``investment 
adviser'' includes a corporate or other trustee performing the 
functions of an investment adviser.

           *       *       *       *       *       *       *


                          enforcement of title

  Sec. 42. (a) The Commission may make such investigations as 
it deems necessary to determine whether any person has violated 
or is about to violate any provision of this title or of any 
rule, regulation, or order hereunder, or to determine whether 
any action in any court or any proceeding before the Commission 
shall be instituted under this title against a particular 
person or persons, or with respect to a particular transaction 
or transactions. The Commission shall 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.
  (b) For the purpose of any investigation or any other 
proceeding under this title, any member of the Commission, or 
any officer thereof 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, contracts, 
agreements, or other records which are relevant or material to 
the inquiry. Such attendance of witnesses and the production of 
any such records may be required from any place in any State or 
in any Territory or other place subject to the jurisdiction of 
the United States at any designated place of hearing.
  (c) 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, contracts, 
agreements, 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; 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 without just cause 
shall fail or refuse to attend and testify or to answer any 
lawful inquiry or to produce books, papers, correspondence, 
memoranda, contracts, agreements, or other records, if in his 
or its 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.
  (d) Whenever it shall appear to the Commission that any 
person has engaged or is about to engage in any act or practice 
constituting a violation of any provision of this title, or of 
any rule, regulation, or order hereunder, it may in its 
discretion bring an action in the proper district court of the 
United States, or the proper United States court of any 
Territory or other place subject to the jurisdiction of the 
United States, to enjoin such acts or practices and to enforce 
compliance with this title or any rule, regulation, or order 
hereunder. Upon a showing that such person has engaged or is 
about to engage in any such act or practice, a permanent or 
temporary injunction or decree or restraining order shall be 
granted without bond. In any proceeding under this subsection 
to enforce compliance with section 7, the court as a court of 
equity may, to the extent it deems necessary or appropriate, 
take exclusive jurisdiction and possession of the investment 
company or companies involved and the books, records, and 
assets thereof, wherever located; and the court shall have 
jurisdiction to appoint a trustee, who with the approval of the 
court shall have power to dispose of any or all of such assets, 
subject to such terms and conditions as the court may 
prescribe. The Commission may transmit such evidence as may be 
available concerning any violation of the provisions of this 
title, or of any rule, regulation, or order thereunder, to the 
Attorney General, who, in his discretion, may institute the 
appropriate criminal proceedings under this title.
  (e) Money Penalties in Civil Actions.--
          (1) Authority of commission.--Whenever it shall 
        appear to the Commission that any person has violated 
        any provision of this title, the rules or regulations 
        thereunder, a Federal court injunction or a bar 
        obtained or entered by the Commission under this title, 
        or a cease-and-desist order entered by the Commission 
        pursuant to section 9(f) of this title, the Commission 
        may bring an action in a United States district court 
        to seek, and the court shall have jurisdiction to 
        impose, upon a proper showing, a civil penalty to be 
        paid by the person who committed such violation.
          (2) Amount of penalty.--
                  (A) First tier.--The amount of the penalty 
                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] $10,000 for 
                a natural person or [$50,000] $100,000 for any 
                other person, or (ii) the gross amount of 
                pecuniary gain to such defendant as a result of 
                the violation.
                  (B) Second tier.--Notwithstanding 
                subparagraph (A), the amount of penalty for 
                each such violation shall not exceed the 
                greater of (i) [$50,000] $100,000 for a natural 
                person or [$250,000] $500,000 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 
                paragraph (1) involved fraud, deceit, 
                manipulation, or deliberate or reckless 
                disregard of a regulatory requirement.
                  [(C) Third tier.--Notwithstanding 
                subparagraphs (A) and (B), the amount of 
                penalty for each such violation 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--
                          [(I) the violation described in 
                        paragraph (1) involved fraud, deceit, 
                        manipulation, or deliberate or reckless 
                        disregard of a regulatory requirement; 
                        and
                          [(II) such violation directly or 
                        indirectly resulted in substantial 
                        losses or created a significant risk of 
                        substantial losses to other persons.]
                  (C) Third tier.--
                          (i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), for a third 
                        tier violation, the amount of penalty 
                        for each such violation shall not 
                        exceed the greater of--
                                  (I) $1,000,000 for a natural 
                                person or $10,000,000 for any 
                                other person;
                                  (II) 3 times the gross amount 
                                of pecuniary gain to the person 
                                who committed the violation; or
                                  (III) the amount of losses 
                                incurred by victims as a result 
                                of the violation.
                          (ii) Third tier violation.--For the 
                        purposes of this subparagraph, the term 
                        ``third tier violation'' means a 
                        violation described in paragraph (1) 
                        that--
                                  (I) involved fraud, deceit, 
                                manipulation, or deliberate or 
                                reckless disregard of a 
                                regulatory requirement; and
                                  (II) directly or indirectly--
                                          (aa) resulted in 
                                        substantial losses to 
                                        other persons;
                                          (bb) created a 
                                        significant risk of 
                                        substantial losses to 
                                        other persons; or
                                          (cc) resulted in 
                                        substantial pecuniary 
                                        gain to the person who 
                                        committed the 
                                        violation.
                  (D) Fourth tier.--Notwithstanding 
                subparagraphs (A), (B), and (C), the maximum 
                amount of penalty for each such violation shall 
                be 3 times the otherwise applicable amount in 
                such subparagraphs if, within the 5-year period 
                preceding such violation, the defendant was 
                criminally convicted for securities fraud or 
                became subject to a judgment or order imposing 
                monetary, equitable, or administrative relief 
                in any Commission action alleging fraud by that 
                defendant.
          (3) Procedures for collection.--
                  (A) Payment of penalty to treasury.--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 the Securities Exchange Act of 1934.
                  (B) Collection of penalties.--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.
                  (C) Remedy not exclusive.--The actions 
                authorized by this subsection may be brought in 
                addition to any other action that the 
                Commission or the Attorney General is entitled 
                to bring.
                  (D) Jurisdiction and venue.--For purposes of 
                section 44 of this title, actions under this 
                paragraph shall be actions to enforce a 
                liability or a duty created by this title.
          [(4) Special provisions relating to a violation of a 
        cease-and-desist order.--In an action to enforce a 
        cease-and-desist order entered by the Commission 
        pursuant to section 9(f), 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) Special provisions relating to a violation of an 
        injunction or certain orders.--
                  (A) In general.--Each separate violation of 
                an injunction or order described in 
                subparagraph (B) shall be a separate offense, 
                except that in the case of a violation through 
                a continuing failure to comply with such 
                injunction or order, each day of the failure to 
                comply with the injunction or order shall be 
                deemed a separate offense.
                  (B) Injunctions and orders.--Subparagraph (A) 
                shall apply with respect to any action to 
                enforce--
                          (i) a Federal court injunction 
                        obtained pursuant to this title;
                          (ii) an order entered or obtained by 
                        the Commission pursuant to this title 
                        that bars, suspends, places limitations 
                        on the activities or functions of, or 
                        prohibits the activities of a person; 
                        or
                          (iii) a cease-and-desist order 
                        entered by the Commission pursuant to 
                        section 9(f).

           *       *       *       *       *       *       *

                              ----------                              


                    INVESTMENT ADVISERS ACT OF 1940

TITLE II--INVESTMENT ADVISERS

           *       *       *       *       *       *       *


                  registration of investment advisers

  Sec. 203. (a) Except as provided in subsection (b) and 
section 203A, it shall be unlawful for any investment adviser, 
unless registered under this section, to make use of the mails 
or any means or instrumentality of interstate commerce in 
connection with his or its business as an investment adviser.
  (b) The provisions of subsection (a) shall not apply to--
          (1) any investment adviser, other than an investment 
        adviser who acts as an investment adviser to any 
        private fund, all of whose clients are residents of the 
        State within which such investment adviser maintains 
        his or its principal office and place of business, and 
        who does not furnish advice or issue analyses or 
        reports with respect to securities listed or admitted 
        to unlisted trading privileges on any national 
        securities exchange;
          (2) any investment adviser whose only clients are 
        insurance companies;
          (3) any investment adviser that is a foreign private 
        adviser;
          (4) any investment adviser that is a charitable 
        organization, as defined in section 3(c)(10)(D) of the 
        Investment Company Act of 1940, or is a trustee, 
        director, officer, employee, or volunteer of such a 
        charitable organization acting within the scope of such 
        person's employment or duties with such organization, 
        whose advice, analyses, or reports are provided only to 
        one or more of the following:
                  (A) any such charitable organization;
                  (B) a fund that is excluded from the 
                definition of an investment company under 
                section 3(c)(10)(B) of the Investment Company 
                Act of 1940; or
                  (C) a trust or other donative instrument 
                described in section 3(c)(10)(B) of the 
                Investment Company Act of 1940, or the 
                trustees, administrators, settlors (or 
                potential settlors), or beneficiaries of any 
                such trust or other instrument;
          (5) any plan described in section 414(e) of the 
        Internal Revenue Code of 1986, any person or entity 
        eligible to establish and maintain such a plan under 
        the Internal Revenue Code of 1986, or any trustee, 
        director, officer, or employee of or volunteer for any 
        such plan or person, if such person or entity, acting 
        in such capacity, provides investment advice 
        exclusively to, or with respect to, any plan, person, 
        or entity or any company, account, or fund that is 
        excluded from the definition of an investment company 
        under section 3(c)(14) of the Investment Company Act of 
        1940;
          (6)(A) any investment adviser that is registered with 
        the Commodity Futures Trading Commission as a commodity 
        trading advisor whose business does not consist 
        primarily of acting as an investment adviser, as 
        defined in section 202(a)(11) of this title, and that 
        does not act as an investment adviser to--
                  (i) an investment company registered under 
                title I of this Act; or
                  (ii) a company which has elected to be a 
                business development company pursuant to 
                section 54 of title I of this Act and has not 
                withdrawn its election; or
          (B) any investment adviser that is registered with 
        the Commodity Futures Trading Commission as a commodity 
        trading advisor and advises a private fund, provided 
        that, if after the date of enactment of the Private 
        Fund Investment Advisers Registration Act of 2010, the 
        business of the advisor should become predominately the 
        provision of securities-related advice, then such 
        adviser shall register with the Commission;
          (7) any investment adviser, other than any entity 
        that has elected to be regulated or is regulated as a 
        business development company pursuant to section 54 of 
        the Investment Company Act of 1940 (15 U.S.C. 80a-54), 
        who solely advises--
                  (A) small business investment companies that 
                are licensees under the Small Business 
                Investment Act of 1958;
                  (B) entities that have received from the 
                Small Business Administration notice to proceed 
                to qualify for a license as a small business 
                investment company under the Small Business 
                Investment Act of 1958, which notice or license 
                has not been revoked; or
                  (C) applicants that are affiliated with 1 or 
                more licensed small business investment 
                companies described in subparagraph (A) and 
                that have applied for another license under the 
                Small Business Investment Act of 1958, which 
                application remains pending; or
          (8) any investment adviser, other than an entity that 
        has elected to be regulated or is regulated as a 
        business development company pursuant to section 54 of 
        the Investment Company Act of 1940 (15 U.S.C. 80a-53), 
        who solely advises--
                  (A) rural business investment companies (as 
                defined in section 384A of the Consolidated 
                Farm and Rural Development Act (7 U.S.C. 
                2009cc)); or
                  (B) companies that have submitted to the 
                Secretary of Agriculture an application in 
                accordance with section 384D(b) of the 
                Consolidated Farm and Rural Development Act (7 
                U.S.C. 2009cc-3(b)) that--
                          (i) have received from the Secretary 
                        of Agriculture a letter of conditions, 
                        which has not been revoked; or
                          (ii) are affiliated with 1 or more 
                        rural business investment companies 
                        described in subparagraph (A).
  (c)(1) An investment adviser, or any person who presently 
contemplates becoming an investment adviser, may be registered 
by filing with the Commission an application for registration 
in such form and containing such of the following information 
and documents as the Commission, by rule, may prescribe as 
necessary or appropriate in the public interest or for the 
protection of investors:
          (A) the name and form of organization under which the 
        investment adviser engages or intends to engage in 
        business; the name of the State or other sovereign 
        power under which such investment adviser is organized; 
        the location of his or its principal office, principal 
        place of business, and branch offices, if any; the 
        names and addresses of his or its partners, officers, 
        directors, and persons performing similar functions or, 
        if such an investment adviser be an individual, of such 
        individual; and the number of his or its employees;
          (B) the education, the business affiliations for the 
        past ten years, and the present business affiliations 
        of such investment adviser and of his or its partners, 
        officers, directors, and persons performing similar 
        functions and of any controlling person thereof;
          (C) the nature of the business of such investment 
        adviser, including the manner of giving advice and 
        rendering analyses or reports;
          (D) a balance sheet certified by an independent 
        public accountant and other financial statements (which 
        shall, as the Commission specifies, be certified);
          (E) the nature and scope of the authority of such 
        investment adviser with respect to clients' funds and 
        accounts;
          (F) the basis or bases upon which such investment 
        adviser is compensated;
          (G) whether such investment adviser, or any person 
        associated with such investment adviser, is subject to 
        any disqualification which would be a basis for denial, 
        suspension, or revocation of registration of such 
        investment adviser under the provisions of subsection 
        (e) of this section; and
          (H) a statement as to whether the principal business 
        of such investment adviser consists or is to consist of 
        acting as investment adviser and a statement as to 
        whether a substantial part of the business of such 
        investment adviser, consists or is to consist of 
        rendering investment supervisory services.
  (2) Within forty-five days of the date of the filing of such 
application (or within such longer period as to which the 
applicant consents) the Commission shall--
          (A) by order grant such registration; or
          (B) institute proceedings to determine whether 
        registration should be denied. Such proceedings shall 
        include notice of the grounds for denial under 
        consideration and opportunity for hearing and shall be 
        concluded within one hundred twenty days of the date of 
        the filing of the application for registration. At the 
        conclusion of such proceedings the Commission, by 
        order, shall grant or deny such registration. The 
        Commission may extend the time for conclusion of such 
        proceedings for up to ninety days if it finds good 
        cause for such extension and publishes its reasons for 
        so finding or for such longer period as to which the 
        applicant consents.
The Commission shall grant such registration if the Commission 
finds that the requirements of this section are satisfied and 
that the applicant is not prohibited from registering as an 
investment adviser under section 203A. The Commission shall 
deny such registration if it does not make such a finding or if 
it finds that if the applicant were so registered, its 
registration would be subject to suspension or revocation under 
subsection (e) of this section.
  (d) Any provision of this title (other than subsection (a) of 
this section) which prohibits any act, practice, or course of 
business if the mails or any means or instrumentality of 
interstate commerce are used in connection therewith shall also 
prohibit any such act, practice, or course of business by any 
investment adviser registered pursuant to this section or any 
person acting on behalf of such an investment adviser, 
irrespective of any use of the mails or any means or 
instrumentality of interstate commerce in connection therewith.
  (e) The Commission, by order, shall censure, place 
limitations on the activities, functions, or operations of, 
suspend for a period not exceeding twelve months, or revoke the 
registration of any investment adviser if it finds, on the 
record after notice and opportunity for hearing, that such 
censure, placing of limitations, suspension, or revocation is 
in the public interest and that such investment adviser, or any 
person associated with such investment adviser, whether prior 
to or subsequent to becoming so associated--
          (1) has willfully made or caused to be made in any 
        application for registration or report required to be 
        filed with the Commission under this title, or in any 
        proceeding before the Commission with respect to 
        registration, any statement which was at the time and 
        in the light of the circumstances under which it was 
        made false or misleading with respect to any material 
        fact, or has omitted to state in any such application 
        or report any material fact which is required to be 
        stated therein.
          (2) has been convicted within ten years preceding the 
        filing of any application for registration or at any 
        time thereafter of any felony or misdemeanor or of a 
        substantially equivalent crime by a foreign court of 
        competent jurisdiction which the Commission finds--
                  (A) involves the purchase or sale of any 
                security, the taking of a false oath, the 
                making of a false report, bribery, perjury, 
                burglary, any substantially equivalent activity 
                however denominated by the laws of the relevant 
                foreign government, or conspiracy to commit any 
                such offense;
                  (B) arises out of the conduct of the business 
                of a broker, dealer, municipal securities 
                dealer, investment adviser, bank, insurance 
                company, government securities broker, 
                government securities dealer, fiduciary, 
                transfer agent, credit rating agency, foreign 
                person performing a function substantially 
                equivalent to any of the above, or entity or 
                person required to be registered under the 
                Commodity Exchange Act or any substantially 
                equivalent statute or regulation;
                  (C) involves the larceny, theft, robbery, 
                extortion, forgery, counterfeiting, fraudulent 
                concealment, embezzlement, fraudulent 
                conversion, or misappropriation of funds or 
                securities or substantially equivalent activity 
                however denominated by the laws of the relevant 
                foreign government; or
                  (D) involves the violation of section 152, 
                1341, 1342, or 1343 or chapter 25 or 47 of 
                title 18, United States Code, or a violation of 
                substantially equivalent foreign statute.
          (3) has been convicted during the 10-year period 
        preceding the date of filing of any application for 
        registration, or at any time thereafter, of--
                  (A) any crime that is punishable by 
                imprisonment for 1 or more years, and that is 
                not described in paragraph (2); or
                  (B) a substantially equivalent crime by a 
                foreign court of competent jurisdiction.
          (4) is permanently or temporarily enjoined by order, 
        judgment, or decree of any court of competent 
        jurisdiction, including any foreign court of competent 
        jurisdiction, from acting as an investment adviser, 
        underwriter, broker, dealer, municipal securities 
        dealer, government securities broker, government 
        securities dealer, transfer agent, credit rating 
        agency, foreign person performing a function 
        substantially equivalent to any of the above, or entity 
        or person required to be registered under the Commodity 
        Exchange Act or any substantially equivalent statute or 
        regulation, or as an affiliated person or employee of 
        any investment company, bank, insurance company, 
        foreign entity substantially equivalent to any of the 
        above, or entity or person required to be registered 
        under the Commodity Exchange Act or any substantially 
        equivalent statute or regulation, or from engaging in 
        or continuing any conduct or practice in connection 
        with any such activity, or in connection with the 
        purchase or sale of any security.
          (5) has willfully violated any provision of the 
        Securities Act of 1933, the Securities Exchange Act of 
        1934, the Investment Company Act of 1940, this title, 
        the Commodity Exchange Act, or the rules or regulations 
        under any such statutes or any rule of the Municipal 
        Securities Rulemaking Board, or is unable to comply 
        with any such provision.
          (6) has willfully aided, abetted, counseled, 
        commanded, induced, or procured the violation by any 
        other person of any provision of the Securities Act of 
        1933, the Securities Exchange Act of 1934, the 
        Investment Company Act of 1940, this title, the 
        Commodity Exchange Act, the rules or regulations under 
        any of such statutes, or the rules of the Municipal 
        Securities Rulemaking Board, or has failed reasonably 
        to supervise, with a view to preventing violations of 
        the provisions of such statutes, rules, and 
        regulations, another person who commits such a 
        violation, if such other person is subject to his 
        supervision. For the purposes of this paragraph no 
        person shall be deemed to have failed reasonably to 
        supervise any person, if--
                  (A) there have been established procedures, 
                and a system for applying such procedures, 
                which would reasonably be expected to prevent 
                and detect, insofar as practicable, any such 
                violation by such other person, and
                  (B) such person has reasonably discharged the 
                duties and obligations incumbent upon him by 
                reason of such procedures and system without 
                reasonable cause to believe that such 
                procedures and system were not being complied 
                with.
          (7) is subject to any order of the Commission barring 
        or suspending the right of the person to be associated 
        with an investment adviser;
          (8) has been found by a foreign financial regulatory 
        authority to have--
                  (A) made or caused to be made in any 
                application for registration or report required 
                to be filed with a foreign securities 
                authority, or in any proceeding before a 
                foreign securities authority with respect to 
                registration, any statement that was at the 
                time and in light of the circumstances under 
                which it was made false or misleading with 
                respect to any material fact, or has omitted to 
                state in any application or report to a foreign 
                securities authority any material fact that is 
                required to be stated therein;
                  (B) violated any foreign statute or 
                regulation regarding transactions in securities 
                or contracts of sale of a commodity for future 
                delivery traded on or subject to the rules of a 
                contract market or any board of trade; or
                  (C) aided, abetted, counseled, commanded, 
                induced, or procured the violation by any other 
                person of any foreign statute or regulation 
                regarding transactions in securities or 
                contracts of sale of a commodity for future 
                delivery traded on or subject to the rules of a 
                contract market or any board of trade, or has 
                been found, by the foreign finanical regulatory 
                authority, to have failed reasonably to 
                supervise, with a view to preventing violations 
                of statutory provisions, and rules and 
                regulations promulgated thereunder, another 
                person who commits such a violation, if such 
                other person is subject to his supervision; or
          (9) is subject to any final order of a State 
        securities commission (or any agency or officer 
        performing like functions), State authority that 
        supervises or examines banks, savings associations, or 
        credit unions, State insurance commission (or any 
        agency or office performing like functions), an 
        appropriate Federal banking agency (as defined in 
        section 3 of the Federal Deposit Insurance Act (12 
        U.S.C. 1813(q))), or the National Credit Union 
        Administration, that--
                  (A) bars such person from association with an 
                entity regulated by such commission, authority, 
                agency, or officer, or from engaging in the 
                business of securities, insurance, banking, 
                savings association activities, or credit union 
                activities; or
                  (B) constitutes a final order based on 
                violations of any laws or regulations that 
                prohibit fraudulent, manipulative, or deceptive 
                conduct.
  (f) The Commission, by order, shall censure or place 
limitations on the activities of any person associated, seeking 
to become associated, or, at the time of the alleged 
misconduct, associated or seeking to become associated with an 
investment adviser, or suspend for a period not exceeding 12 
months or bar any such person from being associated with an 
investment adviser, broker, dealer, municipal securities 
dealer, municipal advisor, transfer agent, or nationally 
recognized statistical rating organization, if the Commission 
finds, on the record after notice and opportunity for hearing, 
that such censure, placing of limitations, suspension, or bar 
is in the public interest and that such person has committed or 
omitted any act or omission enumerated in paragraph (1), (5), 
(6), (8), or (9) of subsection (e) or has been convicted of any 
offense specified in paragraph (2) or (3) of subsection (e) 
within ten years of the commencement of the proceedings under 
this subsection, or is enjoined from any action, conduct, or 
practice specified in paragraph (4) of subsection (e). It shall 
be unlawful for any person as to whom such an order suspending 
or barring him from being associated with an investment adviser 
is in effect willfully to become, or to be, associated with an 
investment adviser without the consent of the Commission, and 
it shall be unlawful for any investment adviser to permit such 
a person to become, or remain, a person associated with him 
without the consent of the Commission, if such investment 
adviser knew, or in the exercise of reasonable care, should 
have known, of such order.
  (g) Any successor to the business of an investment adviser 
registered under this section shall be deemed likewise 
registered hereunder, if within thirty days from its succession 
to such business it shall file an application for registration 
under this section, unless and until the Commission, pursuant 
to subsection (c) or subsection (e) of this section, shall deny 
registration to or revoke or suspend the registration of such 
successor.
  (h) Any person registered under this section may, upon such 
terms and conditions as the Commission finds necessary in the 
public interest or for the protection of investors, withdraw 
from registration by filing a written notice of withdrawal with 
the Commission. If the Commission finds that any person 
registered under this section, or who has pending an 
application for registration filed under this section, is no 
longer in existence, is not engaged in business as an 
investment adviser, or is prohibited from registering as an 
investment adviser under section 203A, the Commission shall by 
order cancel the registration of such person.
  (i) Money Penalties in Administrative Proceedings.--
          (1) Authority of commission.--
                  (A) In general.--In any proceeding instituted 
                pursuant to subsection (e) or (f) against any 
                person, the Commission may impose a civil 
                penalty if it finds, on the record after notice 
                and opportunity for hearing, that such penalty 
                is in the public interest and that such 
                person--
                          (i) has willfully violated any 
                        provision of the Securities Act of 
                        1933, the Securities Exchange Act of 
                        1934, the Investment Company Act of 
                        1940, or this title, or the rules or 
                        regulations thereunder;
                          (ii) has willfully aided, abetted, 
                        counseled, commanded, induced, or 
                        procured such a violation by any other 
                        person;
                          (iii) has willfully made or caused to 
                        be made in any application for 
                        registration or report required to be 
                        filed with the Commission under this 
                        title, or in any proceeding before the 
                        Commission with respect to 
                        registration, any statement which was, 
                        at the time and in the light of the 
                        circumstances under which it was made, 
                        false or misleading with respect to any 
                        material fact, or has omitted to state 
                        in any such application or report any 
                        material fact which was required to be 
                        stated therein; or
                          (iv) has failed reasonably to 
                        supervise, within the meaning of 
                        subsection (e)(6), with a view to 
                        preventing violations of the provisions 
                        of this title and the rules and 
                        regulations thereunder, another person 
                        who commits such a violation, if such 
                        other person is subject to his 
                        supervision;
                  (B) Cease-and-desist proceedings.--In any 
                proceeding instituted pursuant to subsection 
                (k) against any person, the Commission may 
                impose a civil penalty if the Commission finds, 
                on the record, after notice and opportunity for 
                hearing, that such person--
                          (i) is violating or has violated any 
                        provision of this title, or any rule or 
                        regulation issued under this title; or
                          (ii) is or was a cause of the 
                        violation of any provision of this 
                        title, or any rule or regulation issued 
                        under this title.
          (2) Maximum amount of penalty.--
                  (A) First tier.--The maximum amount of 
                penalty for each act or omission described in 
                paragraph (1) shall be [$5,000] $10,000 for a 
                natural person or [$50,000] $100,000 for any 
                other person.
                  (B) Second tier.--Notwithstanding 
                subparagraph (A), the maximum amount of penalty 
                for each such act or omission shall be 
                [$50,000] $100,000 for a natural person or 
                [$250,000] $500,000 for any other person if the 
                act or omission described in paragraph (1) 
                involved fraud, deceit, manipulation, or 
                deliberate or reckless disregard of a 
                regulatory requirement.
                  [(C) Third tier.--Notwithstanding 
                subparagraphs (A) and (B), the maximum amount 
                of penalty for each such act or omission shall 
                be $100,000 for a natural person or $500,000 
                for any other person if--
                          [(i) the act or omission described in 
                        paragraph (1) involved fraud, deceit, 
                        manipulation, or deliberate or reckless 
                        disregard of a regulatory requirement; 
                        and
                          [(ii) such act or omission directly 
                        or indirectly resulted in substantial 
                        losses or created a significant risk of 
                        substantial losses to other persons or 
                        resulted in substantial pecuniary gain 
                        to the person who committed the act or 
                        omission.]
                  (C) Third tier.--
                          (i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), for a third 
                        tier act or omission, the amount of 
                        penalty for each such act or omission 
                        shall not exceed the greater of--
                                  (I) $1,000,000 for a natural 
                                person or $10,000,000 for any 
                                other person;
                                  (II) 3 times the gross amount 
                                of pecuniary gain to the person 
                                who committed the act or 
                                omission; or
                                  (III) the amount of losses 
                                incurred by victims as a result 
                                of the act or omission.
                          (ii) Third tier act or omission.--For 
                        the purposes of this subparagraph, the 
                        term ``third tier act or omission'' 
                        means an act or omission described in 
                        paragraph (1) that--
                                  (I) involved fraud, deceit, 
                                manipulation, or deliberate or 
                                reckless disregard of a 
                                regulatory requirement; and
                                  (II) directly or indirectly--
                                          (aa) resulted in 
                                        substantial losses to 
                                        other persons;
                                          (bb) created a 
                                        significant risk of 
                                        substantial losses to 
                                        other persons; or
                                          (cc) resulted in 
                                        substantial pecuniary 
                                        gain to the person who 
                                        committed the act or 
                                        omission.
                  (D) Fourth tier.--Notwithstanding 
                subparagraphs (A), (B), and (C), the maximum 
                amount of penalty for each such act or omission 
                shall be 3 times the otherwise applicable 
                amount in such subparagraphs if, within the 5-
                year period preceding such act or omission, the 
                person who committed the act or omission was 
                criminally convicted for securities fraud or 
                became subject to a judgment or order imposing 
                monetary, equitable, or administrative relief 
                in any Commission action alleging fraud by that 
                person.
          (3) Determination of public interest.--In considering 
        under this section whether a penalty is in the public 
        interest, the Commission may consider--
                  (A) whether the act or omission for which 
                such penalty is assessed involved fraud, 
                deceit, manipulation, or deliberate or reckless 
                disregard of a regulatory requirement;
                  (B) the harm to other persons resulting 
                either directly or indirectly from such act or 
                omission;
                  (C) the extent to which any person was 
                unjustly enriched, taking into account any 
                restitution made to persons injured by such 
                behavior;
                  (D) whether such person previously has been 
                found by the Commission, another appropriate 
                regulatory agency, or a self-regulatory 
                organization to have violated the Federal 
                securities laws, State securities laws, or the 
                rules of a self-regulatory organization, has 
                been enjoined by a court of competent 
                jurisdiction from violations of such laws or 
                rules, or has been convicted by a court of 
                competent jurisdiction of violations of such 
                laws or of any felony or misdemeanor described 
                in section 203(e)(2) of this title;
                  (E) the need to deter such person and other 
                persons from committing such acts or omissions; 
                and
                  (F) such other matters as justice may 
                require.
          (4) Evidence concerning ability to pay.--In any 
        proceeding in which the Commission may impose a penalty 
        under this section, a respondent may present evidence 
        of the respondent's ability to pay such penalty. The 
        Commission may, in its discretion, consider such 
        evidence in determining whether such penalty is in the 
        public interest. Such evidence may relate to the extent 
        of such person's ability to continue in business and 
        the collectability of a penalty, taking into account 
        any other claims of the United States or third parties 
        upon such person's assets and the amount of such 
        person's assets.
  (j) Authority To Enter an Order Requiring an Accounting and 
Disgorgement.--In any proceeding in which the Commission may 
impose a penalty under this section, the Commission may enter 
an order requiring accounting and disgorgement, including 
reasonable interest. The Commission is authorized to adopt 
rules, regulations, and orders concerning payments to 
investors, rates of interest, periods of accrual, and such 
other matters as it deems appropriate to implement this 
subsection.
  (k) Cease-and-Desist Proceedings.--
          (1) Authority of the commission.--If the Commission 
        finds, after notice and opportunity for hearing, that 
        any person is violating, has violated, or is about to 
        violate any provision of this title, or any rule or 
        regulation thereunder, the Commission may publish its 
        findings and enter an order requiring such person, and 
        any other person that is, was, or would be a cause of 
        the violation, due to an act or omission the person 
        knew or should have known would contribute to such 
        violation, to cease and desist from committing or 
        causing such violation and any future violation of the 
        same provision, rule, or regulation. Such order may, in 
        addition to requiring a person to cease and desist from 
        committing or causing a violation, require such person 
        to comply, or to take steps to effect compliance, with 
        such provision, rule, or regulation, upon such terms 
        and conditions and within such time as the Commission 
        may specify in such order. Any such order may, as the 
        Commission deems appropriate, require future compliance 
        or steps to effect future compliance, either 
        permanently or for such period of time as the 
        Commission may specify, with such provision, rule, or 
        regulation with respect to any security, any issuer, or 
        any other person.
          (2) Hearing.--The notice instituting proceedings 
        pursuant to paragraph (1) shall fix a hearing date not 
        earlier than 30 days nor later than 60 days after 
        service of the notice unless an earlier or a later date 
        is set by the Commission with the consent of any 
        respondent so served.
          (3) Temporary order.--
                  (A) In general.--Whenever the Commission 
                determines that the alleged violation or 
                threatened violation specified in the notice 
                instituting proceedings pursuant to paragraph 
                (1), or the continuation thereof, is likely to 
                result in significant dissipation or conversion 
                of assets, significant harm to investors, or 
                substantial harm to the public interest, 
                including, but not limited to, losses to the 
                Securities Investor Protection Corporation, 
                prior to the completion of the proceedings, the 
                Commission may enter a temporary order 
                requiring the respondent to cease and desist 
                from the violation or threatened violation and 
                to take such action to prevent the violation or 
                threatened violation and to prevent dissipation 
                or conversion of assets, significant harm to 
                investors, or substantial harm to the public 
                interest as the Commission deems appropriate 
                pending completion of such proceedings. Such an 
                order shall be entered only after notice and 
                opportunity for a hearing, unless the 
                Commission, notwithstanding section 211(c) of 
                this title, determines that notice and hearing 
                prior to entry would be impracticable or 
                contrary to the public interest. A temporary 
                order shall become effective upon service upon 
                the respondent and, unless set aside, limited, 
                or suspended by the Commission or a court of 
                competent jurisdiction, shall remain effective 
                and enforceable pending the completion of the 
                proceedings.
                  (B) Applicability.--This paragraph shall 
                apply only to a respondent that acts, or, at 
                the time of the alleged misconduct acted, as a 
                broker, dealer, investment adviser, investment 
                company, municipal securities dealer, 
                government securities broker, government 
                securities dealer, or transfer agent, or is, or 
                was at the time of the alleged misconduct, an 
                associated person of, or a person seeking to 
                become associated with, any of the foregoing.
          (4) Review of temporary orders.--
                  (A) Commission review.--At any time after the 
                respondent has been served with a temporary 
                cease-and-desist order pursuant to paragraph 
                (3), the respondent may apply to the Commission 
                to have the order set aside, limited, or 
                suspended. If the respondent has been served 
                with a temporary cease-and-desist order entered 
                without a prior Commission hearing, the 
                respondent may, within 10 days after the date 
                on which the order was served, request a 
                hearing on such application and the Commission 
                shall hold a hearing and render a decision on 
                such application at the earliest possible time.
                  (B) Judicial review.--Within--
                          (i) 10 days after the date the 
                        respondent was served with a temporary 
                        cease-and-desist order entered with a 
                        prior Commission hearing, or
                          (ii) 10 days after the Commission 
                        renders a decision on an application 
                        and hearing under subparagraph (A), 
                        with respect to any temporary cease-
                        and-desist order entered without a 
                        prior Commission hearing,
                the respondent may apply to the United States 
                district court for the district in which the 
                respondent resides or has its principal office 
                or place of business, or for the District of 
                Columbia, for an order setting aside, limiting, 
                or suspending the effectiveness or enforcement 
                of the order, and the court shall have 
                jurisdiction to enter such an order. A 
                respondent served with a temporary cease-and-
                desist order entered without a prior Commission 
                hearing may not apply to the court except after 
                hearing and decision by the Commission on the 
                respondent's application under subparagraph (A) 
                of this paragraph.
                  (C) No automatic stay of temporary order.--
                The commencement of proceedings under 
                subparagraph (B) of this paragraph shall not, 
                unless specifically ordered by the court, 
                operate as a stay of the Commission's order.
                  (D) Exclusive review.--Section 213 of this 
                title shall not apply to a temporary order 
                entered pursuant to this section.
          (5) Authority to enter an order requiring an 
        accounting and disgorgement.--In any cease-and-desist 
        proceeding under paragraph (1), the Commission may 
        enter an order requiring accounting and disgorgement, 
        including reasonable interest. The Commission is 
        authorized to adopt rules, regulations, and orders 
        concerning payments to investors, rates of interest, 
        periods of accrual, and such other matters as it deems 
        appropriate to implement this subsection.
  (l) Exemption of Venture Capital Fund Advisers.--
          (1) In general.--No investment adviser that acts as 
        an investment adviser solely to 1 or more venture 
        capital funds shall be subject to the registration 
        requirements of this title with respect to the 
        provision of investment advice relating to a venture 
        capital fund. Not later than 1 year after the date of 
        enactment of this subsection, the Commission shall 
        issue final rules to define the term ``venture capital 
        fund'' for purposes of this subsection. The Commission 
        shall require such advisers to maintain such records 
        and provide to the Commission such annual or other 
        reports as the Commission determines necessary or 
        appropriate in the public interest or for the 
        protection of investors.
          (2) Advisers of sbics.--For purposes of this 
        subsection, a venture capital fund includes an entity 
        described in subparagraph (A), (B), or (C) of 
        subsection (b)(7) (other than an entity that has 
        elected to be regulated or is regulated as a business 
        development company pursuant to section 54 of the 
        Investment Company Act of 1940).
          (3) Advisers of rbics.--For purposes of this 
        subsection, a venture capital fund includes an entity 
        described in subparagraph (A) or (B) of subsection 
        (b)(8) (other than an entity that has elected to be 
        regulated as a business development company pursuant to 
        section 54 of the Investment Company Act of 1940 (15 
        U.S.C. 80a-53)).
  (m) Exemption of and Reporting by Certain Private Fund 
Advisers.--
          (1) In general.--The Commission shall provide an 
        exemption from the registration requirements under this 
        section to any investment adviser of private funds, if 
        each of such investment adviser acts solely as an 
        adviser to private funds and has assets under 
        management in the United States of less than 
        $150,000,000.
          (2) Reporting.--The Commission shall require 
        investment advisers exempted by reason of this 
        subsection to maintain such records and provide to the 
        Commission such annual or other reports as the 
        Commission determines necessary or appropriate in the 
        public interest or for the protection of investors.
          (3) Advisers of sbics.--For purposes of this 
        subsection, the assets under management of a private 
        fund that is an entity described in subparagraph (A), 
        (B), or (C) of subsection (b)(7) (other than an entity 
        that has elected to be regulated or is regulated as a 
        business development company pursuant to section 54 of 
        the Investment Company Act of 1940) shall be excluded 
        from the limit set forth in paragraph (1).
          (4) Advisers of rbics.--For purposes of this 
        subsection, the assets under management of a private 
        fund that is an entity described in subparagraph (A) or 
        (B) of subsection (b)(8) (other than an entity that has 
        elected to be regulated or is regulated as a business 
        development company pursuant to section 54 of the 
        Investment Company Act of 1940 (15 U.S.C. 80a-53)) 
        shall be excluded from the limit set forth in paragraph 
        (1).
  (n) Registration and Examination of Mid-sized Private Fund 
Advisers.--In prescribing regulations to carry out the 
requirements of this section with respect to investment 
advisers acting as investment advisers to mid-sized private 
funds, the Commission shall take into account the size, 
governance, and investment strategy of such funds to determine 
whether they pose systemic risk, and shall provide for 
registration and examination procedures with respect to the 
investment advisers of such funds which reflect the level of 
systemic risk posed by such funds.

           *       *       *       *       *       *       *


                          enforcement of title

  Sec. 209. (a) Whenever it shall appear to the Commission, 
either upon complaint or otherwise, that the provisions of this 
title or of any rule or regulation prescribed under the 
authority thereof, have been or are about to be violated by any 
person, it may in its discretion require, and in any event 
shall permit, such person to file with it a statement in 
writing, under oath or otherwise, as to all the facts and 
circumstances relevant to such violation, and may otherwise 
investigate all such facts and circumstances.
  (b) For the purposes of any investigation or any proceeding 
under this title, any member of the Commission or any officer 
thereof 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, contracts, agreements, or other 
records which are relevant or material to the inquiry. Such 
attendance of witnesses and the production of any such records 
may be required from any place in any State or in any Territory 
or other place subject to the jurisdiction of the United States 
at any designated place of hearing.
  (c) 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, contracts, 
agreements, 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 without 
just cause shall fail or refuse to attend and testify or to 
answer any lawful inquiry or to produce books, papers, 
correspondence, memoranda, contracts, agreements, or other 
records, if in his or its 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.
  (d) Whenever it shall appear to the Commission that any 
person has engaged, is engaged, or is about to engage in any 
act or practice constituting a violation of any provision of 
this title, or of any rule, regulation, or order hereunder, or 
that any person has aided, abetted, counseled, commanded, 
induced, or procured, is aiding, abetting, counseling, 
commanding, inducing, or procuring, or is about to aid, abet, 
counsel, command, induce, or procure such a violation, it may 
in its discretion bring an action in the proper district court 
of the United States, or the proper United States court of any 
Territory or other place subject to the jurisdiction of the 
United States, to enjoin such acts or practices and to enforce 
compliance with this title or any rule, regulation, or order 
hereunder. Upon a showing that such person has engaged, is 
engaged, or is about to engage in any such act or practice, or 
in aiding, abetting, counseling, commanding, inducing, or 
procuring any such act or practice, a permanent or temporary 
injunction or decree or restraining order shall be granted 
without bond. The Commission may transmit such evidence as may 
be available concerning any violation of the provisions of this 
title, or of any rule, regulation, or order thereunder, to the 
Attorney General, who, in his discretion, may institute the 
appropriate criminal proceedings under this title.
  (e) Money Penalties in Civil Actions.--
          (1) Authority of commission.--Whenever it shall 
        appear to the Commission that any person has violated 
        any provision of this title, the rules or regulations 
        thereunder, a Federal court injunction or a bar 
        obtained or entered by the Commission under this title, 
        or a cease-and-desist order entered by the Commission 
        pursuant to section 203(k) of this title, the 
        Commission may bring an action in a United States 
        district court to seek, and the court shall have 
        jurisdiction to impose, upon a proper showing, a civil 
        penalty to be paid by the person who committed such 
        violation.
          (2) Amount of penalty.--
                  (A) First tier.--The amount of the penalty 
                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] $10,000 for 
                a natural person or [$50,000] $100,000 for any 
                other person, or (ii) the gross amount of 
                pecuniary gain to such defendant as a result of 
                the violation.
                  (B) Second tier.--Notwithstanding 
                subparagraph (A), the amount of penalty for 
                each such violation shall not exceed the 
                greater of (i) [$50,000] $100,000 for a natural 
                person or [$250,000] $500,000 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 
                paragraph (1) involved fraud, deceit, 
                manipulation, or deliberate or reckless 
                disregard of a regulatory requirement.
                  [(C) Third tier.--Notwithstanding 
                subparagraphs (A) and (B), the amount of 
                penalty for each such violation 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--
                          [(I) the violation described in 
                        paragraph (1) involved fraud, deceit, 
                        manipulation, or deliberate or reckless 
                        disregard of a regulatory requirement; 
                        and
                          [(II) such violation directly or 
                        indirectly resulted in substantial 
                        losses or created a significant risk of 
                        substantial losses to other persons.]
                  (C) Third tier.--
                          (i) In general.--Notwithstanding 
                        subparagraphs (A) and (B), for a third 
                        tier violation, the amount of penalty 
                        for each such violation shall not 
                        exceed the greater of--
                                  (I) $1,000,000 for a natural 
                                person or $10,000,000 for any 
                                other person;
                                  (II) 3 times the gross amount 
                                of pecuniary gain to the person 
                                who committed the violation; or
                                  (III) the amount of losses 
                                incurred by victims as a result 
                                of the violation.
                          (ii) Third tier violation.--For the 
                        purposes of this subparagraph, the term 
                        ``third tier violation'' means a 
                        violation described in paragraph (1) 
                        that--
                                  (I) involved fraud, deceit, 
                                manipulation, or deliberate or 
                                reckless disregard of a 
                                regulatory requirement; and
                                  (II) directly or indirectly--
                                          (aa) resulted in 
                                        substantial losses to 
                                        other persons;
                                          (bb) created a 
                                        significant risk of 
                                        substantial losses to 
                                        other persons; or
                                          (cc) resulted in 
                                        substantial pecuniary 
                                        gain to the person who 
                                        committed the 
                                        violation.
                  (D) Fourth tier.--Notwithstanding 
                subparagraphs (A), (B), and (C), the maximum 
                amount of penalty for each such violation shall 
                be 3 times the otherwise applicable amount in 
                such subparagraphs if, within the 5-year period 
                preceding such violation, the defendant was 
                criminally convicted for securities fraud or 
                became subject to a judgment or order imposing 
                monetary, equitable, or administrative relief 
                in any Commission action alleging fraud by that 
                defendant.
          (3) Procedures for collection.--
                  (A) Payment of penalty to treasury.--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 the Securities Exchange Act of 1934.
                  (B) Collection of penalties.--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.
                  (C) Remedy not exclusive.--The actions 
                authorized by this subsection may be brought in 
                addition to any other action that the 
                Commission or the Attorney General is entitled 
                to bring.
                  (D) Jurisdiction and venue.--For purposes of 
                section 214 of this title, actions under this 
                paragraph shall be actions to enforce a 
                liability or a duty created by this title.
          [(4) Special provisions relating to a violation of a 
        cease-and-desist order.--In an action to enforce a 
        cease-and-desist order entered by the Commission 
        pursuant to section 203(k), 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) Special provisions relating to a violation of an 
        injunction or certain orders.--
                  (A) In general.--Each separate violation of 
                an injunction or order described in 
                subparagraph (B) shall be a separate offense, 
                except that in the case of a violation through 
                a continuing failure to comply with such 
                injunction or order, each day of the failure to 
                comply with the injunction or order shall be 
                deemed a separate offense.
                  (B) Injunctions and orders.--Subparagraph (A) 
                shall apply with respect to any action to 
                enforce--
                          (i) a Federal court injunction 
                        obtained pursuant to this title;
                          (ii) an order entered or obtained by 
                        the Commission pursuant to this title 
                        that bars, suspends, places limitations 
                        on the activities or functions of, or 
                        prohibits the activities of a person; 
                        or
                          (iii) a cease-and-desist order 
                        entered by the Commission pursuant to 
                        section 203(k).
  (f) Aiding and Abetting.--For purposes of any action brought 
by the Commission under subsection (e), any person that 
knowingly or recklessly has aided, abetted, counseled, 
commanded, induced, or procured a violation of any provision of 
this Act, or of any rule, regulation, or order hereunder, shall 
be deemed to be in violation of such provision, rule, 
regulation, or order to the same extent as the person that 
committed such violation.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    H.R. 3641, the Stronger Enforcement of Civil Penalties Act 
of 2019, borrows from H.R. 10, the Financial Choice Act of 2017 
(115th Congress). However, H.R. 3641 fails to include an 
equally important component of H.R. 10 that ensures a balanced 
SEC enforcement program.
    While H.R. 3641 raises statutory limits on certain SEC 
civil monetary penalties as well as triples the penalty cap for 
certain recidivists, it fails to include important reforms to 
the SEC's enforcement program that promote the rule of law and 
ensure due process for the accused. The proposed reforms 
include, among other enhancements: (1) giving respondents in 
SEC administrative proceedings the right to remove their 
enforcement action to federal court to ensure that the 
respondents' due process rights are protected; (2) establishing 
an advisory committee on the Commission's enforcement policies 
and practices to ensure that the program is attaining its goals 
while respecting due process; and (3) requiring the SEC to 
approve, within a year of enactment, an updated manual that 
sets forth the policies and practices that the SEC will follow 
in the enforcement of the securities laws.
    Without additional procedural protections, the increased 
penalties included in H.R. 3641 do not strike the right balance 
between deterring and punishing securities fraud and protecting 
shareholders who are ultimately responsible for paying large 
civil penalties for violations that the shareholders did not 
commit. Further, the SEC did not request these additional 
penalties, nor have they expressed concern with the current 
penalty thresholds.
    During the July 16, 2019 markup, Representative Davidson 
(R-Ohio) offered a substitute amendment to H.R. 3641 to include 
the Financial CHOICE Act's crucial due process reforms. 
However, the Chairwoman ruled the commonsense amendment non-
germane. Committee Republicans regret that the Democrats missed 
an opportunity to continue the groundwork laid in the 115th 
Congress with H.R. 10, choosing instead to move a bill that the 
Senate will not consider nor for which the SEC has indicated a 
need.

                                   David Kustoff.
                                   Lance Gooden.
                                   Scott R. Tipton.
                                   Peter T. King.
                                   Trey Hollingsworth.
                                   Bryan Steil.
                                   Warren Davidson.
                                   Denver Riggleman.
                                   Lee M. Zeldin.
                                   Patrick T. McHenry.
                                   Steve Stivers.
                                   Blaine Leutkemeyer.
                                   Frank D. Lucas.
                                   Barry Loudermilk.
                                   Tom Emmer.
                                   Ted Budd.
                                   Roger Williams.
                                   J. French Hill.
                                   John W. Rose (TN).
                                   Anthony Gonzalez (OH).
                                   Andy Barr.
                                   Alexander X. Mooney (WV).
                                   Ann Wagner.
                                   Bill Huizenga.
                                   Bill Posey.
                                   William R. Timmons, IV.

                                  [all]