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Public Law 101-429—Oct. 15, 1990 104 Stat. 931

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Public Law 101-429—Oct. 15, 1990 104 Stat. 931 PUBLIC LAW 101-429—OCT. 15, 1990 104 STAT. 931 Public Law 101-429 101st Congress An Act To amend the FederaQ securities laws in order to provide additional enforcement Q^ ^^ ^^^^ remedies for violations of those laws and to eliminate abuses in transactions in ' penny stocks, and for other purposes. 1^^" ""^' J Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, Securities Enforcement SECTION 1. SHORT TITLE; TABLE OF CONTENTS; EFFECTIVE DATE. Remedies and Penny Stock (a) SHORT TITLE.—This Act may be cited as the "Securities Reform Act of Enforcement Remedies and Penny Stock Reform Act of 1990". ^^ (b) TABLE OF CONTENTS.- _ fn^Sent Sec. 1. Short title; table of contents; effective dates. companies. Fraud. TITLE I—AMENDMENTS TO THE SECURITIES ACT OF 1933 15 USC 78a note. Sec. 101. Authority of a court to impose money penalties and to prohibit persons from serving as officers and directors. Sec. 102. Cease-and-desist authority. TITLE II—AMENDMENTS TO THE SECURITIES EXCHANGE ACT OF 1934 Sec. 201. Enforcement of title. Sec. 202. Civil remedies in administrative proceedings. Sec. 203. Cease-and-desist authority. Sec. 204. Procedural rules for cease-and-desist proceedings. Sec. 205. Conforming amendments to section 15B. Sec. 206. Signature guarantees. TITLE III—AMENDMENTS TO THE INVESTMENT COMPANY ACT OF 1940 Sec. 301. Civil remedies in administrative proceedings. Sec. 302. Money penalties in civil actions. TITLE IV—AMENDMENTS TO THE INVESTMENT ADVISERS ACT OF 1940 Sec. 401. Civil remedies in administrative proceedings. Sec. 402. Money penalties in civil actions. Sec. 403. Conforming amendment to section 214. TITLE V—PENNY STOCK REFORM Sec. 501. Short title. Sec. 502. Findings. Sec. 503. Definition of penny stock. Sec. 504. Expansion of section 15(b) sanction authority with respect to penny stocks. Sec. 505. Requirements for brokers and dealers of penny stocks. Sec. 506. Development of automated quotation systems for penny stocks. Sec. 507. Voidability of contracts in violation of section 15(cX2). Sec. 508. Restrictions on blank check offerings. Sec. 509. Broker/dealer disciplinary history. Sec. 510. Review of regulatory structures and procedures. (c) EFFECTIVE DATES.— 15 USC 77g note. (1) IN GENERAL.—Except as provided in paragraphs (2) and (3), the amendments made by this Act shall be effective upon enactment. (2) CIVIL PENALTIES.— (A) IN GENERAL.—No civil penalty may be imposed pursu­ ant to the amendments made by this Act on the basis of conduct occurring before the date of enactment of this Act. 49-139 O - 90 (429) 104 STAT. 932 PUBLIC LAW 101-429—OCT. 15, 1990 (B) ACCOUNTING AND DISGORGEMENT.—Subparagraph (A) shall not operate to preclude the Securities and Exchange Commission from ordering an accounting or disgorgement pursuant to the amendments made by this Act. (3) SPECIAL RULES FOR TITLE V.— (A) SECTIONS 503 AND 504.—Except as provided in subparagraph (C), sections 503 and 504 shall be effective 12 months after the date of enactment of this Act or upon the issuance of final regulations initially implementing such section, whichever is earlier. (B) SECTIONS 505 AND 508.—Except as provided in subparagraph (C), sections 505 and 508 shall be effective 18 months after the date of enactment of this Act or upon the issuance of final regulations initially implementing such sections, whichever is earlier. (C) COMMENCEMENT OF RULEMAKING.—Not later than 180 days after the date of enactment of this Act, the Commis­ sion shall commence rulemaking proceedings to implement sections 503, 505, and 508. TITLE I—AMENDMENTS TO THE SECURITIES ACT OF 1933 SEC. 101. AUTHORITY OF A COURT TO IMPOSE MONEY PENALTIES AND TO PROHIBIT PERSONS FROM SERVING AS OFFICERS AND DIREC­ TORS. Section 20 of the Securities Act of 1933 (15 U.S.C. lit) is amended by adding at the end thereof the following new subsections: "(d) MONEY PENALTIES IN CIVIL ACTIONS.— "(1) AUTHORITY OF COMMISSION.—Whenever it shall appear to the Commission that any person has violated any provision of this title, the rules or regulations thereunder, or a ceeise-and- desist order entered by the Commission pursuant to section 8A of this title, other than by committing a violation subject to a penalty pursuant to section 21A of the Securities Exchange Act of 1934, the Commission may bring an action in a United States district court to seek, and the court shall have jurisdiction to impose, upon a proper showing, a civil penalty to be paid by the person who committed such violation. "(2) AMOUNT OF PENALTY.— "(A) FIRST TIER.—The amount of the penalty shall be determined by the court in light of the facts and cir­ cumstances. For each violation, the amount of the penalty shall not exceed the greater of (i) $5,000 for a natural person or $50,000 for any other person, or (ii) the gross amount of pecuniary gain to such defendant as a result of the violation. "(B) SECOND TIER.—Notwithstanding subparagraph (A), the amount of penalty for each such violation shall not exceed the greater of (i) $50,000 for a natural person or $250,000 for any other person, or (ii) the gross amount of pecuniary ggiin to such defendant as a result of the viola­ tion, if the violation described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless dis­ regard of a regulatory requirement. PUBLIC LAW 101-429—OCT. 15, 1990 104 STAT. 933 "(C) THIRD TIER.—Notwithstanding subparagraphs (A) and (B), the amount of penalty for each such violation shall not exceed the greater of (i) $100,000 for a natural person or $500,000 for any other person, or (ii) the gross amount of pecuniary gain to such defendant as a result of the viola­ tion, if— "(I) the violation described in paragraph (1) involved fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement; and "(II) such violation directly or indirectly resulted in substantial losses or created a significant risk of substantial losses to other persons. "(3) PROCEDURES FOR COLLECTION.— "(A) PAYMENT OF PENALTY TO TREASURY.—A penalty im­ posed under this section shall be payable into the Treasury of the United States. "(B) 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 Commis­ sion may refer the matter to the Attorney General who shall recover such penalty by action in the appropriate United States district court. "(C) REMEDY NOT EXCLUSIVE.—The actions authorized by this subsection may be brought in addition to any other action that the Commission or the Attorney General is entitled to bring. "(D) JURISDICTION AND VENUE.—For purposes of section 22 of this title, actions under this section shall be actions to enforce a liability or a duty created by this title. "(4) SPECIAL PROVISIONS RELATING TO A VIOLATION OF A CEASE- AND-DESIST ORDER.—In an action to enforce a cease-and-desist order entered by the Commission pursuant to section 8A, each separate violation of such order shall be a separate offense, except that in the case of a violation through a continuing failure to comply with such an order, each day of the failure to comply with the order shall be deemed a separate offense. "(e) AUTHORITY OF A COURT TO PROHIBIT PERSONS FROM SERVING AS OFFICERS AND DIRECTORS.—In any proceeding under subsection (b), the court may prohibit, conditionally or unconditionally, and permanently or for such period of time as it shall determine, any person who violated section 17(aXl) of this title from acting as an officer or director of any issuer that has a class of securities reg­ istered pursuant to section 12 of the Securities Exchange Act of 1934 or that is required to file reports pursuant to section 15(d) of such Act if the person's conduct demonstrates substantial unfitness to serve as an officer or director of any such issuer.". SEC. 102. CEASE-AND-DESIST AUTHORITY. ^ The Securities Act of 1933 (15 U.S.C. 77 et seq.) is amended by inserting after section 8 the following: "CEASE-AND-DESIST PROCEEDINGS "SEC. 8A. (a) AUTHORITY OF THE COMMISSION.—If the Commission 15 use 77h-i. finds, after notice and opportunity for hearing, that any person is violating, has violated, or is about to violate any provision of this title, or any rule or regulation thereunder, the Commission may 104 STAT. 934 PUBLIC LAW 101-429—OCT. 15, 1990 publish its findings and enter an order requiring such person, and any other person that is, was, or would be a cause of the violation, due to an act or omission the person knew or should have known would contribute to such violation, to cease and desist from commit­ ting or causing such violation and any future violation of the same provision, rule, or regulation. Such order may, in addition to requir­ ing a person to cease and desist from committing or causing a violation, require such person to comply, or to take steps to effect compliance, with such provision, rule, or regulation, upon such terms and conditions and within such time as the Commission may specify in such order. Any such order may, as the Commission deems appropriate, require future compliance or steps to effect future compliance, either permanently or for such period of time as the Commission may specify, with such provision, rule, or regulation with respect to any security, any issuer, or any other person. "(b) HEARING.—The notice instituting proceedings pursuant to subsection (a) shall fix a hearing date not earlier than 30 days nor later than 60 days after service of the notice unless an earlier or a later date is set by the Commission with the consent of any respond­ ent so served.
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