15 USC 78u-1 - Civil penalties for insider trading

U.S Code last checked for updates: Nov 22, 2024

§ 78u–1.

Civil penalties for insider trading

(a)

Authority to impose civil penalties

(1)

Judicial actions by Commission authorized

Whenever it shall appear to the Commission that any person has violated any provision of this chapter or the rules or regulations thereunder by purchasing or selling a security or security-based swap agreement while in possession of material, nonpublic information in, or has violated any such provision by communicating such information in connection with, a transaction on or through the facilities of a national securities exchange or from or through a broker or dealer, and which is not part of a public offering by an issuer of securities other than standardized options or security futures products, the Commission—

(A)

may bring an action in a United States district court to seek, and the court shall have jurisdiction to impose, a civil penalty to be paid by the person who committed such violation; and

(B)

may, subject to subsection (b)(1), bring an action in a United States district court to seek, and the court shall have jurisdiction to impose, a civil penalty to be paid by a person who, at the time of the violation, directly or indirectly controlled the person who committed such violation.

(2)

Amount of penalty for person who committed violation

(3)

Amount of penalty for controlling person

(b)

Limitations on liability

(1)

Liability of controlling persons

No controlling person shall be subject to a penalty under subsection (a)(1)(B) unless the Commission establishes that—

(A)

such controlling person knew or recklessly disregarded the fact that such controlled person was likely to engage in the act or acts constituting the violation and failed to take appropriate steps to prevent such act or acts before they occurred; or

(B)

such controlling person knowingly or recklessly failed to establish, maintain, or enforce any policy or procedure required under section 78o(f) 1

 See References in Text note below.

of this title or section 80b–4a of this title and such failure substantially contributed to or permitted the occurrence of the act or acts constituting the violation.

(2)

Additional restrictions on liability

(c)

Authority of Commission

(d)

Procedures for collection

(1)

Payment of penalty to Treasury

(2)

Collection of penalties

(3)

Remedy not exclusive

(4)

Jurisdiction and venue

(5)

Statute of limitations

(e)

Definition

(f)

Limitation on Commission authority

(g)

Duty of Members and employees of Congress

(1)

In general

(2)

Definitions

In this subsection—

(A)

the term “Member of Congress” means a member of the Senate or House of Representatives, a Delegate to the House of Representatives, and the Resident Commissioner from Puerto Rico; and

(B)

the term “employee of Congress” means—

(i)

any individual (other than a Member of Congress), whose compensation is disbursed by the Secretary of the Senate or the Chief Administrative Officer of the House of Representatives; and

(ii)

any other officer or employee of the legislative branch (as defined in section 13101(11) of title 5).

(3)

Rule of construction

(h)

Duty of other Federal officials

(1)

In general

(2)

Definitions

In this subsection—

(A)

the term “executive branch employee”—

(i)

has the meaning given the term “employee” under section 2105 of title 5;

(ii)

includes—

(I)

the President;

(II)

the Vice President; and

(III)

an employee of the United States Postal Service or the Postal Regulatory Commission;

(B)

the term “judicial employee” has the meaning given that term in section 13101(9) of title 5; and

(C)

the term “judicial officer” has the meaning given that term under section 13101(10) of title 5.

(3)

Rule of construction

(i)

Participation in initial public offerings

(June 6, 1934, ch. 404, title I, § 21A, as added Pub. L. 100–704, § 3(a)(2), Nov. 19, 1988, 102 Stat. 4677; amended Pub. L. 101–429, title II, § 202(b), Oct. 15, 1990, 104 Stat. 938; Pub. L. 106–554, § 1(a)(5) [title II, § 205(a)(4), title III, § 303(k), (l)], Dec. 21, 2000, 114 Stat. 2763, 2763A–426, 2763A–456, 2763A–457; Pub. L. 107–204, title III, § 308(d)(2), July 30, 2002, 116 Stat. 785; Pub. L. 111–203, title VII, § 762(d)(7), title IX, § 923(b)(2), July 21, 2010, 124 Stat. 1761, 1850; Pub. L. 112–105, §§ 4(b)(2), 9(b)(2)(B), 12, Apr. 4, 2012, 126 Stat. 292, 297, 300; Pub. L. 117–286, § 4(c)(24), Dec. 27, 2022, 136 Stat. 4357.)

cite as: 15 USC 78u-1