The SEC’s general punishment structure looks at the outcome of a company engaging in fraud and, if the company benefited from it, charging a penalty.
But the SEC is looking to rework the guidelines created in 2006 that focus on two factors: 1) whether the company benefit ted from the fraud and 2) whether a penalty would hurt or help the shareholders harmed by the fraud.
The Wall Street Journal’s Kara Scannell reported that the SEC is considering changing it’s penalty policy for fraud cases, and that “one commissioner [is] calling for more attention to deterrence when calculating fines.”
By only instituting a penalty when the company benefits from the fraud — i.e., it works — it “fails to appropriately focus on deterrence,” Commissioner Luis Aguilar said.
So does that mean bigger fines for those who defraud but make no money doing it? Details are few at this point, and any change would require approval by the five-member commission.
It’s basically a punitive damages model — even if you only caused economic harm of “x,” you’re still going to pay a penalty amount to remind you not to do it the next time.
The Wall Street Journal’s full report is here.
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