SEC Enforcement Mechanisms Overview – No Specific Allegations

What Are the Different Types of Resolutions with SEC? Civil Injunctive Actions and Remedies In a civil injunctive action, SEC seeks a court order compelling the defendant to obey the Jaw in the future. Violating such an order can result in civil or criminal con- tempt proceedings. Civil contempt sanctions, brought by SEC, are remedial rather than punitive in nature and serve one of two purposes: to compensate the party injured as a result of the violation of the injunction or force compliance with the terms of the injunction. Where a defendant has profited from a violation of law, SEC can obtain the equitable relief of disgorgement of ill-gotten gains and pre-judgment interest and can also obtain civil money penalties pursuant to Sections 21(d)(3) and 32(c) of the Exchange Act. SEC may also seek ancillary relief (such as an accounting from a defendant). Pursuant to Section 21(d)(5), SEC also may seek, and any federal court may grant, any other equitable relief that may be appropriate or necessary for the benefit of investors, such as enhanced remedial measures or the retention of an inde- pendent compliance consultant or monitor. Civil Administrative Actions and Remedies SEC has the ability to institute various types of admin- istrative proceedings against a person or an entity that it believes has violated the law. This type of enforcement action is brought by SEC’s Enforcement Division and is litigated before an SEC administrative law judge (ALJ). The AL]’s decision is subject to appeal directly to the Securities and Exchange Commission itself, and the Commission’s decision is in turn subject to review by a US. Court of Appeals. Administrative proceedings provide for a variety of relief. For regulated persons and entities, such as broker- dealers and investment advisers and persons associated with them, sanctions include censure, limitation on activities, suspension of up to twelve months, and bar from associa- tion or revocation of registration. For professionals such as attorneys and accountants, SEC can order in Rule 102(e) Resolutions proceedings that the professional be censured, suspended, or barred from practicing before SEC." SEC staff can seek an order from an administrative law judge requiring the respondent to cease and desist from any current or future violations of the securities laws. In addition, SEC can obtain disgorgement, pre-judgment interest, and civil money pen- alties in administrative proceedings under Section 21B of the Exchange Act, and also can obtain other equitable relief, such as enhanced remedial measures or the retention of an independent compliance consultant or monitor. Deferred Prosecution Agreements A deferred prosecution agreement is a written agree- ment between SEC and a potential cooperating individual or company in which SEC agrees to forego an enforcement action against the individual or company if the individual or company agrees to, among other things: (1) cooper- ate truthfully and fully in SEC’s investigation and related enforcement actions; (2) enter into a long-term tolling agreement; (3) comply with express prohibitions and/ or undertakings during a period of deferred prosecution; and (4) under certain circumstances, agree either to admit or not to contest underlying facts that SEC could assert to establish a violation of the federal securities laws. If the agreement is violated during the period of deferred prosecu- tion, SEC staff may recommend an enforcement action to the Commission against the individual or company for the original misconduct as well as any additional misconduct. Furthermore, if the Commission authorizes the enforce- ment action, SEC staff may use any factual admissions made by the cooperating individual or company in support of a motion for summary judgment, while maintaining the ability to bring an enforcement action for any additional misconduct at a later date. HOUSE_OVERSIGHT_022578