On July 27, 2023 Shearman & Sterling filed an amicus brief on behalf of law professors and former officials of the Securities and Exchange Commission (“SEC”) asking the Court to grant review of legal issues related to the SEC’s application of its penalty statutes. The brief describes certain practical aspects of the SEC enforcement program affected by the lack of clear and consistent legal standards for interpreting the statutes that set civil monetary penalty amounts in SEC enforcement cases.
The SEC seeks money penalties in nearly every enforcement case it brings. In fiscal 2022, the SEC and courts ordered that defendants pay $4.2 billion. in civil monetary penalties. Nonetheless, no uniform and predictable interpretation of the SEC penalty statutes exists. The absence of legal standards to set penalty amounts particularly affects settlement negotiations, which occur in a high percentage of SEC cases. As a result, these cases largely are settled on a “blind basis” where the defendants do not know what penalty actually could be imposed by a court or the SEC if they unsuccessfully litigated the SEC’s claims.
Amici argue that the lack of consistent and predictable legal standards for assessing civil penalties in SEC cases matters to the securities markets and the national economy. The securities laws regulate the formation of capital in the United States securities markets, and the SEC’s enforcement program is a critical component of the administration of the securities laws.