SECTION 21A OF THE
SECURITIES EXCHANGE ACT OF 1934
15
U.S.C. § 78u-1 (1988)
(a) Authority to
impose civil penalties.
(1) Judicial actions by Commission
authorized. Whenever it shall appear to
the Commission that any person has violated any provision of this title or the
rules or regulations thereunder by purchasing or selling a security while in
possession of material, nonpublic information in, or has violated any such
provision by communicating such information in connection with, a transaction on
or through the facilities of a national securities exchange or from or through
a broker or dealer, and which is not part of a public offering by an issuer of
securities other than standardized options, the Commission-
(A) may bring an action in a United
States district court to seek, and the court shall have jurisdiction to impose,
a civil penalty to be paid by the person who committed such violation; and
(B) may, subject to subsection (b)(1),
bring an action in a United States district court to seek, and the court shall
have jurisdiction to impose, a civil penalty to be paid by a person who, at the
time of the violation, directly or indirectly controlled the person who
committed such violation.
(2) Amount of penalty for person who
committed violation. The amount of the
penalty which may be imposed on the person who committed such violation shall
be determined by the court in light of the facts and circumstances, but shall
not exceed three times the profit gained or loss avoided as a result of such
unlawful purchase, sale, or communication.
(3) Amount of penalty for controlling
person. The amount of the penalty which
may be imposed on any person who, at the time of the violation, directly or
indirectly controlled the person who committed such violation, shall be
determined by the court in light of the facts and circumstances, but shall not
exceed the greater of $ 1,000,000, or three times the amount of the profit
gained or loss avoided as a result of such controlled person's violation. If such controlled person's violation was a
violation by communication, the profit gained or loss avoided as a result of
the violation shall, for purposes of this paragraph only, be deemed to be
limited to the profit gained or loss avoided by the person or persons to whom
the controlled person directed such communication.
(b) Limitations on
liability.
(1) Liability of controlling persons. No controlling person shall be subject to a
penalty under subsection (a)(1)(B) unless the Commission establishes that-
(A) such controlling person knew or
recklessly disregarded the fact that such controlled person was likely to
engage in the act or acts constituting the violation and failed to take
appropriate steps to prevent such act or acts before they occurred; or
(B) such controlling person knowingly or
recklessly failed to establish, maintain, or enforce any policy or procedure
required under section 15(f) of this title or section 204A of the Investment
Advisers Act of 1940 and such failure substantially contributed to or permitted
the occurrence of the act or acts constituting the violation.
(2) Additional restrictions on
liability. No person shall be subject
to a penalty under subsection (a) solely by reason of employing another person
who is subject to a penalty under such subsection, unless such employing person
is liable as a controlling person under paragraph (1) of this subsection. Section 20(a) of this title shall not apply
to actions under subsection (a) of this section.
(c) Authority of Commission. The Commission, by such rules, regulations,
and orders as it considers necessary or appropriate in the public interest or
for the protection of investors, may exempt, in whole or in part, either
unconditionally or upon specific terms and conditions, any person or
transaction or class of persons or transactions from this section.
(d) Procedures for
collection.
(1) Payment of penalty to treasury. A penalty imposed under this section shall
(subject to subsection (e)) be payable into the Treasury of the United States.
(2) 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.
(3) Remedy not exclusive. The actions authorized by this section may
be brought in addition to any other actions that the Commission or the Attorney
General are entitled to bring.
(4) Jurisdiction and venue. For purposes of section 27 of this title,
actions under this section shall be actions to enforce a liability or a duty
created by this title.
(5) Statute of limitations. No action may be brought under this section
more than 5 years after the date of the purchase or sale. This section shall not be construed to bar
or limit in any manner any action by the Commission or the Attorney General
under any other provision of this title, nor shall it bar or limit in any
manner any action to recover penalties, or to seek any other order regarding
penalties, imposed in an action commenced within 5 years of such transaction.
(e) Authority to
award bounties to information.
Notwithstanding the provisions of subsection (d)(1), there shall be paid
from amounts imposed as a penalty under this section and recovered by the
Commission or the Attorney General, such sums, not to exceed 10 percent of such
amounts, as the Commission deems appropriate, to the person or persons who provide
information leading to the imposition of such penalty. Any determinations under this subsection,
including whether, to whom, or in what amount to make payments, shall be in the
sole discretion of the Commission, except that no such payment shall be made to
any member, officer, or employee of any appropriate regulatory agency, the
Department of Justice, or a self-regulatory organization. Any such determination shall be final and
not subject to judicial review.
(f) Definition. For purposes of this section, "profit
gained" or 'loss avoided' is the difference between the purchase or sale
price of the security and the value of that security as measured by the trading
price of the security a reasonable period after public dissemination of the
nonpublic information.