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Tuesday, January 31, 2006

Fine Print: SEC Penalty Plan Explains Price Of Fraud

To some, the concept of penalties for violations of the federal securities laws is, without reference to amount, "Draconian," and the practice has been described as criminalizing the federal securities laws. While penalties have been with us at least since Draco, the exacting of penalties as a component of securities law regulation is of more modern vintage. Until 1990, when Congress passed the Remedies Act, the Securities and Exchange Commission lacked explicit authority to obtain civil money penalties in most enforcement cases. That may seem surprising, given the almost routine nature with which monetary penalties now are levied in enforcement cases. The imposition of penalties is a useful punishment and deterrent in the Division of Enforcement program’s arsenal. And, with the enactment of the Fair Funds provision under the Sarbanes-Oxley Act—an idea that originated with the SEC—legislators can sleep better at night knowing that penalties to be imposed will often be returned to wronged investors.

posted by Brian Moran @ 9:41 AM   0 comments

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