15 U.S.C. § 77h–1 — Cease-and-desist proceedings

(a) Authority of Commission If, after notice and a hearing, the SEC finds someone is violating, has violated, or is about to violate this subchapter or a rule under it, the SEC can publish its findings and order that person — and anyone else who caused or would cause the violation through something they knew or should have known would contribute to it — to stop and avoid repeating it. The order can also require the person to comply, or take steps toward complying, with the rule, on terms and within a time the SEC sets. The SEC can make this compliance requirement permanent or set it for a specific period, and apply it to any security, issuer, or other person, as it sees fit. (b) Hearing The notice starting these proceedings must set a hearing date between 30 and 60 days after the notice is served, unless the SEC sets an earlier or later date with the consent of whoever was served. (c) Temporary order (1) In general: If the SEC decides the alleged or threatened violation — or letting it continue — is likely to cause serious loss or misuse of assets, serious harm to investors, or serious harm to the public interest (including losses to the Securities Investor Protection Corporation) before the full proceeding wraps up, it can issue a temporary order. That order tells the respondent to stop the violation and take action to prevent it and to prevent asset loss or harm. This normally requires notice and a hearing first, unless the SEC decides that would be impractical or against the public interest. The order takes effect once served on the respondent and stays in force, unless a court or the SEC lifts, limits, or pauses it, until the full proceeding ends. (2) Applicability: This subsection only applies to a respondent who is (or was, at the time of the alleged misconduct) a broker, dealer, investment adviser, investment company, municipal securities dealer, government securities broker or dealer, or transfer agent — or someone associated with, or trying to become associated with, one of those. (d) Review of temporary orders (1) Commission review: After being served with a temporary order, the respondent can ask the SEC to set it aside, limit it, or pause it. If the order was issued without a prior SEC hearing, the respondent can request a hearing within 10 days of being served, and the SEC must hold that hearing and decide quickly. (2) Judicial review: Within 10 days of being served with a temporary order issued after a prior SEC hearing, or within 10 days of the SEC's decision on a paragraph (1) request for an order issued without a prior hearing, the respondent can ask a federal district court — where they live, do business, or in Washington, D.C. — to set the order aside, limit it, or pause it, and the court has power to do so. A respondent whose order was issued without a prior hearing cannot go to court until after the SEC has held a hearing and decided on their paragraph (1) request. (3) No automatic stay: Starting a court case under paragraph (2) does not pause the SEC's order unless the court specifically orders that. (4) Exclusive review: Section 77i(a) — the general court-review process — does not apply to a temporary order issued under this section. (e) Authority to require accounting and giving back profits In any cease-and-desist proceeding, the SEC can order the person to account for and give back ill-gotten gains, plus reasonable interest. The SEC can set rules about paying this money to investors, interest rates, how it builds up over time, and anything else needed to carry this out. (f) Authority to bar people from serving as officers or directors In any cease-and-desist proceeding, the SEC can permanently or temporarily bar someone who violated section 77q(a)(1) or its rules from acting as an officer or director of an issuer whose securities are registered under section 78 l, or that must file reports under section 78 o (d) — if that person's conduct shows they aren't fit to serve in that role. (g) Authority to impose money penalties (1) Grounds: In a cease-and-desist proceeding, after notice and a hearing, the SEC can fine someone if it finds, on the record, that the person is violating or has violated this subchapter or its rules (or caused such a violation), and that a penalty serves the public interest. (2) Maximum penalty: There are three tiers. First tier: up to $7,500 for a person, $75,000 for anyone else, per violation. Second tier: up to $75,000 for a person, $375,000 for anyone else, if the violation involved fraud, deceit, manipulation, or reckless disregard of a rule. Third tier: up to $150,000 for a person, $725,000 for anyone else, if the violation involved fraud, deceit, manipulation, or reckless disregard of a rule, and it caused substantial losses (or a real risk of them) to others, or substantial financial gain to the wrongdoer. (3) Evidence about ability to pay: The respondent can present evidence about their ability to pay the fine. The SEC may consider this when deciding whether the penalty serves the public interest — including whether the respondent could stay in business, whether the fine could actually be collected, and any other claims on the respondent's assets by the government or others.