Securities enforcement actions brought by the SEC may have a better chance of reaching the $1 million threshold to qualify for a monetary incentive under the Dodd-Frank whistleblower programs if a new bipartisan bill introduced into the Senate is passed.
The Stronger Enforcement of Civil Penalties Act of 2015, introduced by Senators Chuck Grassley (R-Iowa) and Jack Reed (D-R.I.), will increase the civil monetary penalties the Securities & Exchange Commission can levy against individuals and firms in violation of the law. The bill would allow civil penalties against individuals up to $1 million for serious offenses and $10 million per violation against entities.
The current limits are $160,000 for individuals and $775,000 for entities. Disgorgement of illicit gains or efforts to make investors whole can exceed the restrictions of the current limits. Multiple violations and disgorgement accounts for the SEC’s ability to hand down fines in excess of the currently specified amounts.
Senator Reed said that the bill gives the SEC the firepower it need to crack down on Wall Street fraud. A similar piece of legislation was previously introduced into Congress in 2012 and failed to gain traction.
If the SEC is able to find individuals and entities larger fines, more enforcement actions will reach the $1 million minimum threshold to start the reward claim submission process. A notice of covered action, the first step in the submission of a whistleblower award claim, only happens when the total amount recovered in an enforcement action reaches $1 million.