(Bloomberg News) U.S. senators Jack Reed and Charles Grassley introduced a bill to authorize the Securities and Exchange Commission to impose bigger sanctions after the agency said it didn't have adequate tools to deter financial fraud.
Under the proposed legislation, fines against individuals would be capped at $1 million per violation instead of $150,000 and penalties for firms would be limited to $10 million from $725,000 for each misdeed, according to a joint statement today by Reed, the Rhode Island Democrat who leads a subcommittee that oversees the SEC, and Grassley, the Iowa Republican.
The proposals reflect a November request by SEC Chairman Mary Schapiro that Congress authorize the agency to seek penalties based on the scope of investor losses.
Schapiro made the request the same day as U.S. District Judge Jed Rakoff rejected a proposed $285 million settlement with Citigroup Inc., aimed at resolving claims the Wall Street bank misled investors in a $1 billion financial product linked to souring mortgages. Rakoff said the agreement was "a very good deal for Citigroup" that represented "a mild and modest cost of doing business."
Reed said the bill, which he titled the Stronger Enforcement of Civil Penalties Act of 2012, would help the SEC deter individuals and firms from repeatedly violating securities laws.
"If they look at the bottom line and see they can break the law, get caught, pay a nominal fine, and still profit, the cycle of misconduct will continue," Reed said in a statement.
Grassley said the SEC should use all of the penalties at its disposal.
"If a fine is just decimal dust for a Wall Street firm, that's not a deterrent," Grassley said in a statement. "A penalty should mean something, and it should get the recidivist's attention."