15 U.S.C. § 78u–3 — Cease-and-desist proceedings

(a) Authority of Commission If, after notice and a hearing, the SEC finds that someone is violating, has violated, or is about to violate this chapter or its rules, 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 ("cease and desist") committing or causing that violation, and any future violation of the same rule. The order can also require the person to comply, or take steps toward compliance, on terms and within a time the SEC sets. The SEC can require future compliance, permanently or for a set period, regarding any security, issuer, or other person. (b) Hearing The notice starting the proceeding must set a hearing date between 30 and 60 days after the notice is served, unless the SEC and the person being served agree on a different date. (c) Temporary order (1) In general. If the SEC decides that the alleged violation — or letting it continue — is likely to cause significant loss or misuse of assets, significant harm to investors, or substantial harm to the public interest (including losses to the Securities Investor Protection Corporation) before the full proceeding is done, the SEC can enter a temporary cease-and-desist order requiring the person to stop, and to take steps to prevent the violation and that 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 person and stays in force through the full proceeding, unless the SEC or a court sets it aside, limits it, or suspends it. (2) Applicability. This temporary-order power only applies to a person 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, registered public accounting firm, or transfer agent — or a person associated with (or seeking to become associated with) any of those. (3) Temporary freeze. (A) During a lawful investigation of an issuer or its directors, officers, controlling persons, agents, or employees for possible federal securities law violations, if the SEC believes the issuer is likely to make extraordinary payments to any of those people, the SEC can ask a federal court for a temporary order making the issuer put those payments into an interest-bearing escrow account, under court supervision, for 45 days. This normally requires notice and a hearing first, unless the court decides that would be impractical or against the public interest. The order takes effect immediately, is served on the affected parties, and — unless a court sets it aside, limits it, or suspends it — stays in force for 45 days. A court can extend it for up to 45 more days for good cause, but the combined period can't exceed 90 days. (B) What happens next depends on whether the issuer or other person is charged with a securities law violation before the order (including any extension) expires. If they are charged, the order stays in effect, subject to court approval, until the related legal proceedings end, and the affected person can ask the court to review the order. If they aren't charged before the order expires, the escrow ends, and the disputed payments — plus accrued interest — go back to the issuer or other affected person. (d) Review of temporary orders (1) Commission review. At any time after being served with a temporary cease-and-desist order, the person subject to it can ask the SEC to set it aside, limit it, or suspend it. If the order was entered without a prior SEC hearing, the person can ask, within 10 days of being served, for a hearing on that request, and the SEC must hold one and decide as quickly as possible. (2) Judicial review. The person can ask the federal district court where they live or do business, or the court for the District of Columbia, to set aside, limit, or suspend the order. They must do this within 10 days after being served (if there was a prior SEC hearing) or within 10 days after the SEC decides their paragraph (1) request (if there wasn't). If there was no prior SEC hearing, the person must go through the SEC review process in paragraph (1) before going to court. (3) No automatic stay. Asking a court to review the order doesn't automatically pause it, unless the court specifically orders that. (4) Exclusive review. The general review procedure in section 78y of this title doesn't apply to these temporary orders. (e) Authority to enter order requiring accounting and disgorgement In a cease-and-desist proceeding under subsection (a), the SEC can order the person to provide an accounting and to disgorge ill-gotten gains, with reasonable interest. The SEC can adopt rules about how disgorged money is handled. (f) Authority of the Commission to prohibit persons from serving as officers or directors In a cease-and-desist proceeding under subsection (a), the SEC can bar a person who violated section 78j(b) of this title (the general antifraud rule) or its rules from serving as an officer or director of any issuer whose securities are registered under section 78l, or that must file reports under section 78o(d) — permanently or for a set time, with or without conditions — if that person's conduct shows they're unfit to serve.