15 U.S.C. § 78u : US Code - Section 78U: Investigations and actions

    (a) Authority and discretion of Commission to investigate
      violations
      (1) The Commission may, in its discretion, make such
    investigations as it deems necessary to determine whether any
    person has violated, is violating, or is about to violate any
    provision of this chapter, the rules or regulations thereunder, the
    rules of a national securities exchange or registered securities
    association of which such person is a member or a person
    associated, or, as to any act or practice, or omission to act,
    while associated with a member, formerly associated with a member,
    the rules of a registered clearing agency in which such person is a
    participant, or, as to any act or practice, or omission to act,
    while a participant, was a participant, the rules of the Public
    Company Accounting Oversight Board, of which such person is a
    registered public accounting firm, a person associated with such a
    firm, or, as to any act, practice, or omission to act, while
    associated with such firm, a person formerly associated with such a
    firm, or the rules of the Municipal Securities Rulemaking Board,
    and may require or permit any person to file with it a statement in
    writing, under oath or otherwise as the Commission shall determine,
    as to all the facts and circumstances concerning the matter to be
    investigated. The Commission is authorized in its discretion, to
    publish information concerning any such violations, and to
    investigate any facts, conditions, practices, or matters which it
    may deem necessary or proper to aid in the enforcement of such
    provisions, in the prescribing of rules and regulations under this
    chapter, or in securing information to serve as a basis for
    recommending further legislation concerning the matters to which
    this chapter relates.
      (2) On request from a foreign securities authority, the
    Commission may provide assistance in accordance with this paragraph
    if the requesting authority states that the requesting authority is
    conducting an investigation which it deems necessary to determine
    whether any person has violated, is violating, or is about to
    violate any laws or rules relating to securities matters that the
    requesting authority administers or enforces. The Commission may,
    in its discretion, conduct such investigation as the Commission
    deems necessary to collect information and evidence pertinent to
    the request for assistance. Such assistance may be provided without
    regard to whether the facts stated in the request would also
    constitute a violation of the laws of the United States. In
    deciding whether to provide such assistance, the Commission shall
    consider whether (A) the requesting authority has agreed to provide
    reciprocal assistance in securities matters to the Commission; and
    (B) compliance with the request would prejudice the public interest
    of the United States.
    (b) Attendance of witnesses; production of records
      For the purpose of any such investigation, or any other
    proceeding under this chapter, any member of the Commission or any
    officer designated by it is empowered to administer oaths and
    affirmations, subpena witnesses, compel their attendance, take
    evidence, and require the production of any books, papers,
    correspondence, memoranda, or other records which the Commission
    deems relevant or material to the inquiry. Such attendance of
    witnesses and the production of any such records may be required
    from any place in the United States or any State at any designated
    place of hearing.
    (c) Judicial enforcement of investigative power of Commission;
      refusal to obey subpena; criminal sanctions
      In case of contumacy by, or refusal to obey a subpena issued to,
    any person, the Commission may invoke the aid of any court of the
    United States within the jurisdiction of which such investigation
    or proceeding is carried on, or where such person resides or
    carries on business, in requiring the attendance and testimony of
    witnesses and the production of books, papers, correspondence,
    memoranda, and other records. And such court may issue an order
    requiring such person to appear before the Commission or member or
    officer designated by the Commission, there to produce records, if
    so ordered, or to give testimony touching the matter under
    investigation or in question; and any failure to obey such order of
    the court may be punished by such court as a contempt thereof. All
    process in any such case may be served in the judicial district
    whereof such person is an inhabitant or wherever he may be found.
    Any person who shall, without just cause, fail or refuse to attend
    and testify or to answer any lawful inquiry or to produce books,
    papers, correspondence, memoranda, and other records, if in his
    power so to do, in obedience to the subpena of the Commission,
    shall be guilty of a misdemeanor and, upon conviction, shall be
    subject to a fine of not more than $1,000 or to imprisonment for a
    term of not more than one year, or both.
    (d) Injunction proceedings; authority of court to prohibit persons
      from serving as officers and directors; money penalties in civil
      actions
      (1) Whenever it shall appear to the Commission that any person is
    engaged or is about to engage in acts or practices constituting a
    violation of any provision of this chapter, the rules or
    regulations thereunder, the rules of a national securities exchange
    or registered securities association of which such person is a
    member or a person associated with a member, the rules of a
    registered clearing agency in which such person is a participant,
    the rules of the Public Company Accounting Oversight Board, of
    which such person is a registered public accounting firm or a
    person associated with such a firm, or the rules of the Municipal
    Securities Rulemaking Board, it may in its discretion bring an
    action in the proper district court of the United States, the
    United States District Court for the District of Columbia, or the
    United States courts of any territory or other place subject to the
    jurisdiction of the United States, to enjoin such acts or
    practices, and upon a proper showing a permanent or temporary
    injunction or restraining order shall be granted without bond. The
    Commission may transmit such evidence as may be available
    concerning such acts or practices as may constitute a violation of
    any provision of this chapter or the rules or regulations
    thereunder to the Attorney General, who may, in his discretion,
    institute the necessary criminal proceedings under this chapter.
      (2) Authority of Court To Prohibit Persons From Serving as
    Officers and Directors. - In any proceeding under paragraph (1) of
    this subsection, the court may prohibit, conditionally or
    unconditionally, and permanently or for such period of time as it
    shall determine, any person who violated section 78j(b) of this
    title or the rules or regulations thereunder from acting as an
    officer or director of any issuer that has a class of securities
    registered pursuant to section 78l of this title or that is
    required to file reports pursuant to section 78o(d) of this title
    if the person's conduct demonstrates unfitness to serve as an
    officer or director of any such issuer.
      (3) Money Penalties in Civil Actions. - 
        (A) Authority of commission. - Whenever it shall appear to the
      Commission that any person has violated any provision of this
      chapter, the rules or regulations thereunder, or a cease-and-
      desist order entered by the Commission pursuant to section 78u-3
      of this title, other than by committing a violation subject to a
      penalty pursuant to section 78u-1 of this title, the Commission
      may bring an action in a United States district court to seek,
      and the court shall have jurisdiction to impose, upon a proper
      showing, a civil penalty to be paid by the person who committed
      such violation.
        (B) Amount of penalty. - 
          (i) First tier. - The amount of the penalty shall be
        determined by the court in light of the facts and
        circumstances. For each violation, the amount of the penalty
        shall not exceed the greater of (I) $5,000 for a natural person
        or $50,000 for any other person, or (II) the gross amount of
        pecuniary gain to such defendant as a result of the violation.
          (ii) Second tier. - Notwithstanding clause (i), the amount of
        penalty for each such violation shall not exceed the greater of
        (I) $50,000 for a natural person or $250,000 for any other
        person, or (II) the gross amount of pecuniary gain to such
        defendant as a result of the violation, if the violation
        described in subparagraph (A) involved fraud, deceit,
        manipulation, or deliberate or reckless disregard of a
        regulatory requirement.
          (iii) Third tier. - Notwithstanding clauses (i) and (ii), the
        amount of penalty for each such violation shall not exceed the
        greater of (I) $100,000 for a natural person or $500,000 for
        any other person, or (II) the gross amount of pecuniary gain to
        such defendant as a result of the violation, if - 
            (aa) the violation described in subparagraph (A) involved
          fraud, deceit, manipulation, or deliberate or reckless
          disregard of a regulatory requirement; and
            (bb) such violation directly or indirectly resulted in
          substantial losses or created a significant risk of
          substantial losses to other persons.

        (C) Procedures for collection. - 
          (i) Payment of penalty to treasury. - A penalty imposed under
        this section shall be payable into the Treasury of the United
        States, except as otherwise provided in section 7246 of this
        title and section 78u-6 of this title.
          (ii) Collection of penalties. - If a person upon whom such a
        penalty is imposed shall fail to pay such penalty within the
        time prescribed in the court's order, the Commission may refer
        the matter to the Attorney General who shall recover such
        penalty by action in the appropriate United States district
        court.
          (iii) Remedy not exclusive. - The actions authorized by this
        paragraph may be brought in addition to any other action that
        the Commission or the Attorney General is entitled to bring.
          (iv) Jurisdiction and venue. - For purposes of section 78aa
        of this title, actions under this paragraph shall be actions to
        enforce a liability or a duty created by this chapter.

        (D) Special provisions relating to a violation of a cease-and-
      desist order. - In an action to enforce a cease-and-desist order
      entered by the Commission pursuant to section 78u-3 of this
      title, each separate violation of such order shall be a separate
      offense, except that in the case of a violation through a
      continuing failure to comply with the order, each day of the
      failure to comply shall be deemed a separate offense.

      (4) Prohibition of attorneys' fees paid from commission
    disgorgement funds. - Except as otherwise ordered by the court upon
    motion by the Commission, or, in the case of an administrative
    action, as otherwise ordered by the Commission, funds disgorged as
    the result of an action brought by the Commission in Federal court,
    or as a result of any Commission administrative action, shall not
    be distributed as payment for attorneys' fees or expenses incurred
    by private parties seeking distribution of the disgorged funds.
      (5) Equitable Relief. - In any action or proceeding brought or
    instituted by the Commission under any provision of the securities
    laws, the Commission may seek, and any Federal court may grant, any
    equitable relief that may be appropriate or necessary for the
    benefit of investors.
      (6) Authority of a court to prohibit persons from participating
    in an offering of penny stock. - 
        (A) In general. - In any proceeding under paragraph (1) against
      any person participating in, or, at the time of the alleged
      misconduct who was participating in, an offering of penny stock,
      the court may prohibit that person from participating in an
      offering of penny stock, conditionally or unconditionally, and
      permanently or for such period of time as the court shall
      determine.
        (B) Definition. - For purposes of this paragraph, the term
      "person participating in an offering of penny stock" includes any
      person engaging in activities with a broker, dealer, or issuer
      for purposes of issuing, trading, or inducing or attempting to
      induce the purchase or sale of, any penny stock. The Commission
      may, by rule or regulation, define such term to include other
      activities, and may, by rule, regulation, or order, exempt any
      person or class of persons, in whole or in part, conditionally or
      unconditionally, from inclusion in such term.
    (e) Mandamus
      Upon application of the Commission the district courts of the
    United States and the United States courts of any territory or
    other place subject to the jurisdiction of the United States shall
    have jurisdiction to issue writs of mandamus, injunctions, and
    orders commanding (1) any person to comply with the provisions of
    this chapter, the rules, regulations, and orders thereunder, the
    rules of a national securities exchange or registered securities
    association of which such person is a member or person associated
    with a member, the rules of a registered clearing agency in which
    such person is a participant, the rules of the Public Company
    Accounting Oversight Board, of which such person is a registered
    public accounting firm or a person associated with such a firm, the
    rules of the Municipal Securities Rulemaking Board, or any
    undertaking contained in a registration statement as provided in
    subsection (d) of section 78o of this title, (2) any national
    securities exchange or registered securities association to enforce
    compliance by its members and persons associated with its members
    with the provisions of this chapter, the rules, regulations, and
    orders thereunder, and the rules of such exchange or association,
    or (3) any registered clearing agency to enforce compliance by its
    participants with the provisions of the rules of such clearing
    agency.
    (f) Rules of self-regulatory organizations or Board
      Notwithstanding any other provision of this chapter, the
    Commission shall not bring any action pursuant to subsection (d) or
    (e) of this section against any person for violation of, or to
    command compliance with, the rules of a self-regulatory
    organization or the Public Company Accounting Oversight Board
    unless it appears to the Commission that (1) such self-regulatory
    organization or the Public Company Accounting Oversight Board is
    unable or unwilling to take appropriate action against such person
    in the public interest and for the protection of investors, or (2)
    such action is otherwise necessary or appropriate in the public
    interest or for the protection of investors.
    (g) Consolidation of actions; consent of Commission
      Notwithstanding the provisions of section 1407(a) of title 28, or
    any other provision of law, no action for equitable relief
    instituted by the Commission pursuant to the securities laws shall
    be consolidated or coordinated with other actions not brought by
    the Commission, even though such other actions may involve common
    questions of fact, unless such consolidation is consented to by the
    Commission.
    (h) Access to records
      (1) The Right to Financial Privacy Act of 1978 [12 U.S.C. 3401 et
    seq.] shall apply with respect to the Commission, except as
    otherwise provided in this subsection.
      (2) Notwithstanding section 1105 or 1107 of the Right to
    Financial Privacy Act of 1978 [12 U.S.C. 3405 or 3407], the
    Commission may have access to and obtain copies of, or the
    information contained in financial records of a customer from a
    financial institution without prior notice to the customer upon an
    ex parte showing to an appropriate United States district court
    that the Commission seeks such financial records pursuant to a
    subpena issued in conformity with the requirements of section 19(b)
    (!1) of the Securities Act of 1933, section 21(b) of the Securities
    Exchange Act of 1934 [15 U.S.C. 78u(b)], section 42(b) of the
    Investment Company Act of 1940 [15 U.S.C. 80a-41(b)], or section
    209(b) of the Investment Advisers Act of 1940 [15 U.S.C. 80b-9(b)],
    and that the Commission has reason to believe that - 

        (A) delay in obtaining access to such financial records, or the
      required notice, will result in - 
          (i) flight from prosecution;
          (ii) destruction of or tampering with evidence;
          (iii) transfer of assets or records outside the territorial
        limits of the United States;
          (iv) improper conversion of investor assets; or
          (v) impeding the ability of the Commission to identify or
        trace the source or disposition of funds involved in any
        securities transaction;

        (B) such financial records are necessary to identify or trace
      the record or beneficial ownership interest in any security;
        (C) the acts, practices or course of conduct under
      investigation involve - 
          (i) the dissemination of materially false or misleading
        information concerning any security, issuer, or market, or the
        failure to make disclosures required under the securities laws,
        which remain uncorrected; or
          (ii) a financial loss to investors or other persons protected
        under the securities laws which remains substantially
        uncompensated; or

        (D) the acts, practices or course of conduct under
      investigation - 
          (i) involve significant financial speculation in securities;
        or
          (ii) endanger the stability of any financial or investment
        intermediary.

      (3) Any application under paragraph (2) for a delay in notice
    shall be made with reasonable specificity.
      (4)(A) Upon a showing described in paragraph (2), the presiding
    judge or magistrate judge shall enter an ex parte order granting
    the requested delay for a period not to exceed ninety days and an
    order prohibiting the financial institution involved from
    disclosing that records have been obtained or that a request for
    records has been made.
      (B) Extensions of the period of delay of notice provided in
    subparagraph (A) of up to ninety days each may be granted by the
    court upon application, but only in accordance with this subsection
    or section 1109(a), (b)(1), or (b)(2) of the Right to Financial
    Privacy Act of 1978 [12 U.S.C. 3409(a), (b)(1), or (b)(2)].
      (C) Upon expiration of the period of delay of notification
    ordered under subparagraph (A) or (B), the customer shall be served
    with or mailed a copy of the subpena insofar as it applies to the
    customer together with the following notice which shall describe
    with reasonable specificity the nature of the investigation for
    which the Commission sought the financial records:
      "Records or information concerning your transactions which are
    held by the financial institution named in the attached subpena
    were supplied to the Securities and Exchange Commission on (date).
    Notification was withheld pursuant to a determination by the (title
    of court so ordering) under section 21(h) of the Securities
    Exchange Act of 1934 that (state reason). The purpose of the
    investigation or official proceeding was (state purpose)."
      (5) Upon application by the Commission, all proceedings pursuant
    to paragraphs (2) and (4) shall be held in camera and the records
    thereof sealed until expiration of the period of delay or such
    other date as the presiding judge or magistrate judge may permit.
      (6) The Commission shall compile an annual tabulation of the
    occasions on which the Commission used each separate subparagraph
    or clause of paragraph (2) of this subsection or the provisions of
    the Right to Financial Privacy Act of 1978 [12 U.S.C. 3401 et seq.]
    to obtain access to financial records of a customer and include it
    in its annual report to the Congress. Section 1121(b) (!1) of the
    Right to Financial Privacy Act of 1978 shall not apply with respect
    to the Commission.
      (7)(A) Following the expiration of the period of delay of
    notification ordered by the court pursuant to paragraph (4) of this
    subsection, the customer may, upon motion, reopen the proceeding in
    the district court which issued the order. If the presiding judge
    or magistrate judge finds that the movant is the customer to whom
    the records obtained by the Commission pertain, and that the
    Commission has obtained financial records or information contained
    therein in violation of this subsection, other than paragraph (1),
    it may order that the customer be granted civil penalties against
    the Commission in an amount equal to the sum of - 
        (i) $100 without regard to the volume of records involved;
        (ii) any out-of-pocket damages sustained by the customer as a
      direct result of the disclosure; and
        (iii) if the violation is found to have been willful,
      intentional, and without good faith, such punitive damages as the
      court may allow, together with the costs of the action and
      reasonable attorney's fees as determined by the court.

      (B) Upon a finding that the Commission has obtained financial
    records or information contained therein in violation of this
    subsection, other than paragraph (1), the court, in its discretion,
    may also or in the alternative issue injunctive relief to require
    the Commission to comply with this subsection with respect to any
    subpena which the Commission issues in the future for financial
    records of such customer for purposes of the same investigation.
      (C) Whenever the court determines that the Commission has failed
    to comply with this subsection, other than paragraph (1), and the
    court finds that the circumstances raise questions of whether an
    officer or employee of the Commission acted in a willful and
    intentional manner and without good faith with respect to the
    violation, the Office of Personnel Management shall promptly
    initiate a proceeding to determine whether disciplinary action is
    warranted against the agent or employee who was primarily
    responsible for the violation. After investigating and considering
    the evidence submitted, the Office of Personnel Management shall
    submit its findings and recommendations to the Commission and shall
    send copies of the findings and recommendations to the officer or
    employee or his representative. The Commission shall take the
    corrective action that the Office of Personnel Management
    recommends.
      (8) The relief described in paragraphs (7) and (10) shall be the
    only remedies or sanctions available to a customer for a violation
    of this subsection, other than paragraph (1), and nothing herein or
    in the Right to Financial Privacy Act of 1978 [12 U.S.C. 3401 et
    seq.] shall be deemed to prohibit the use in any investigation or
    proceeding of financial records, or the information contained
    therein, obtained by a subpena issued by the Commission. In the
    case of an unsuccessful action under paragraph (7), the court shall
    award the costs of the action and attorney's fees to the Commission
    if the presiding judge or magistrate judge finds that the
    customer's claims were made in bad faith.
      (9)(A) The Commission may transfer financial records or the
    information contained therein to any government authority if the
    Commission proceeds as a transferring agency in accordance with
    section 1112 of the Right to Financial Privacy Act of 1978 [12
    U.S.C. 3412], except that the customer notice required under
    section 1112(b) or (c) of such Act [12 U.S.C. 3412(b) or (c)] may
    be delayed upon a showing by the Commission, in accordance with the
    procedure set forth in paragraphs (4) and (5), that one or more of
    subparagraphs (A) through (D) of paragraph (2) apply.
      (B) The Commission may, without notice to the customer pursuant
    to section 1112 or the Right to Financial Privacy Act of 1978 [12
    U.S.C. 3412], transfer financial records or the information
    contained therein to a State securities agency or to the Department
    of Justice. Financial records or information transferred by the
    Commission to the Department of Justice or to a State securities
    agency pursuant to the provisions of this subparagraph may be
    disclosed or used only in an administrative, civil, or criminal
    action or investigation by the Department of Justice or the State
    securities agency which arises out of or relates to the acts,
    practices, or courses of conduct investigated by the Commission,
    except that if the Department of Justice or the State securities
    agency determines that the information should be disclosed or used
    for any other purpose, it may do so if it notifies the customer,
    except as otherwise provided in the Right to Financial Privacy Act
    of 1978 [12 U.S.C. 3401 et seq.], within 30 days of its
    determination, or complies with the requirements of section 1109 of
    such Act [12 U.S.C. 3409] regarding delay of notice.
      (10) Any government authority violating paragraph (9) shall be
    subject to the procedures and penalties applicable to the
    Commission under paragraph (7)(A) with respect to a violation by
    the Commission in obtaining financial records.
      (11) Notwithstanding the provisions of this subsection, the
    Commission may obtain financial records from a financial
    institution or transfer such records in accordance with provisions
    of the Right to Financial Privacy Act of 1978 [12 U.S.C. 3401 et
    seq.].
      (12) Nothing in this subsection shall enlarge or restrict any
    rights of a financial institution to challenge requests for records
    made by the Commission under existing law. Nothing in this
    subsection shall entitle a customer to assert any rights of a
    financial institution.
      (13) Unless the context otherwise requires, all terms defined in
    the Right to Financial Privacy Act of 1978 [12 U.S.C. 3401 et seq.]
    which are common to this subsection shall have the same meaning as
    in such Act.
    (i) Information to CFTC
      The Commission shall provide the Commodity Futures Trading
    Commission with notice of the commencement of any proceeding and a
    copy of any order entered by the Commission against any broker or
    dealer registered pursuant to section 78o(b)(11) of this title, any
    exchange registered pursuant to section 78f(g) of this title, or
    any national securities association registered pursuant to section
    78o-3(k) of this title.