Securities News

Statement of the Securities and Exchange Commission Concerning Financial Penalties

Washington, D.C., Jan. 4, 2006 – The U.S. Securities and Exchange Commission today issued the following statement concerning financial penalties:

Today the Commission announced the filing of two settled actions against corporate issuers, SEC v. McAfee, Inc. and In the Matter of Applix, Inc. In one, the company will pay a civil money penalty; in the other, a penalty is not part of the settlement.

The question of whether, and if so to what extent, to impose civil penalties against a corporation raises significant questions for our mission of investor protection. The authority to impose such penalties is relatively recent in the Commission’s history, and the use of very large corporate penalties is more recent still. Recent cases have not produced a clear public view of when and how the Commission will use corporate penalties, and within the Commission itself a variety of views have heretofore been expressed, but not reconciled.

The Commission believes it important to provide the maximum possible degree of clarity, consistency, and predictability in explaining the way that its corporate penalty authority will be exercised. To this end, we are issuing this statement describing with particularity the framework for our penalty determinations in these two cases. We have issued these decisions, and this statement of principles, unanimously.

In determining whether or not to impose penalties against the corporations in these cases, we carefully considered our statutory authority, and the legislative history surrounding that statutory authority.

In 1990, Congress passed the Securities Enforcement Remedies and Penny Stock Reform Act (the “Remedies Act”), which gave the Commission authority generally to seek civil money penalties in enforcement cases.1 The penalty provisions added by the Remedies Act expressly authorize the Commission to obtain money penalties from entities, including corporate issuers. These provisions also enhanced the Commission’s authority to fine individuals. Today, we limit our discussion to penalties against corporations, although we view penalties against individual offenders as a critical component in punishing and deterring violative conduct.

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	Did You Know?
	Transfer Trades: Entries made upon the books of Futures Commission Merchants Transfer Trades: Entries made upon the books of Futures Commission Merchants for the purpose of: (1) transferring existing trades from one account to another within the same firm where no change in ownership is involved; (2) transferring existing trades from the books of one FCM to the books of another FCM where no change in ownership is involved. Also called Ex-Pit Transactions.