SEC Now Seeks Power To Impose Greater Fines On Firms That Commit Fraud

Federal Judge Jed Rakoff dealt the Securities and Exchange Commission a serious reprimand when he rejected a $285 million settlement it reached with Citigroup, Inc. Smarting from the blow, the SEC is asking Congress to enact legislation that would give it “the power to impose much-larger penalties on financial firms and individuals that commit fraud.” In a letter to the Senate Banking Committee Monday, SEC Chairman Mary Schapiro asked for the power to impose fines up to nine times greater than the maximum currently allowed; to increase the maximum penalty to triple the net profit made from the fraud; and to triple penalties for repeat offenders who have been subject to SEC action or criminal conviction in the preceding five years. Had these rules been in place for the Citigroup case, “the maximum penalty would jump to $1.44 billion from $160 million.”