Civil money penalties (CMPs) are fines for violating laws and regulations, including securities laws. They are enforced by the Securities and Exchange Commission (SEC) and other agencies, and the penalties typically match the violator's profits.
A CMP is a fine imposed on entities that violate specific laws and regulations, including securities laws in finance. The SEC enforces and collects these fines, which can vary from tens of thousands to millions of dollars, depending on the violator's unlawful profits. CMPs are also imposed by other organizations, such as medical agencies, courts, and legal agencies, in different contexts.
Civil Money Penalties in Detail
Financial laws and regulations protect individuals from unscrupulous professionals and corporations. The SEC and Financial Industry Regulatory Authority (FINRA) oversee and enforce these rules to ensure fair markets, informed decisions, and fiduciary responsibilities. Violators face punitive damages for insider trading, fraud, regulatory manipulation, risking others' losses, and pursuing unlawful profits.
Financial regulators can penalize lawbreakers through court actions and monetary fines known as CMPs. The amount of CMPs depends on the extent of the violation. For example, if insider trading results in a $1 million profit, the responsible person usually pays $1 million in CMPs.
Current Maximum and Proposed CMPs
Individuals and entities can face a maximum CMP of $207,183 and $1,035,909 per violation, respectively, in SEC enforcement actions as of 2022. A pending bill called the Stronger Enforcement of Civil Penalties Act of 2019 proposes to increase these penalties to $1 million per violation for individuals and $10 million per violation for corporate entities. The SEC ensures that any money collected through CMPs goes directly back to the investors or other victims who were affected by the violation.
CMP Enforcement Agencies
Civil money penalties are not solely limited to securities-law violations; they are also enforced by other government agencies for various types of fraud. For example, the Office of Inspector General may impose CMPs on individuals and organizations that engage in fraudulent activities, such as filing false claims for medical benefits, receiving kickbacks, committing fraud related to government agreements, contracts, and grants, or violating state and federal guidelines.
Civil money penalties serve as a deterrent against violating financial laws and regulations. The SEC and other agencies enforce CMPs, with the penalties often matching the violator's profits. These fines are vital in ensuring fair markets, informed decisions, and fiduciary responsibilities. While CMPs are not solely limited to securities-law violations, they play a crucial role in protecting individuals from unscrupulous professionals and corporations.