{"identifier":"/us/usc/t15/s78u\u20131","title":15,"num":"\u00a7\u202f78u\u20131.","heading":"Civil penalties for insider trading","text":"\u00a7\u202f78u\u20131.\nCivil penalties for insider trading\n(a)\nAuthority to impose civil penalties\n(1)\nJudicial actions by Commission authorized\nWhenever it shall appear to the Commission that any person has violated any provision of this chapter or the rules or regulations thereunder by purchasing or selling a security or security-based swap agreement while in possession of material, nonpublic information in, or has violated any such provision by communicating such information in connection with, a transaction on or through the facilities of a national securities exchange or from or through a broker or dealer, and which is not part of a public offering by an issuer of securities other than standardized options or security futures products, the Commission\u2014\n(A) may bring an action in a United States district court to seek, and the court shall have jurisdiction to impose, a civil penalty to be paid by the person who committed such violation; and\n(B) may, subject to subsection (b)(1), bring an action in a United States district court to seek, and the court shall have jurisdiction to impose, a civil penalty to be paid by a person who, at the time of the violation, directly or indirectly controlled the person who committed such violation.\n(2)\nAmount of penalty for person who committed violation\nThe amount of the penalty which may be imposed on the person who committed such violation shall be determined by the court in light of the facts and circumstances, but shall not exceed three times the profit gained or loss avoided as a result of such unlawful purchase, sale, or communication.\n(3)\nAmount of penalty for controlling person\nThe amount of the penalty which may be imposed on any person who, at the time of the violation, directly or indirectly controlled the person who committed such violation, shall be determined by the court in light of the facts and circumstances, but shall not exceed the greater of $1,000,000, or three times the amount of the profit gained or loss avoided as a result of such controlled person\u2019s violation. If such controlled person\u2019s violation was a violation by communication, the profit gained or loss avoided as a result of the violation shall, for purposes of this paragraph only, be deemed to be limited to the profit gained or loss avoided by the person or persons to whom the controlled person directed such communication.\n(b)\nLimitations on liability\n(1)\nLiability of controlling persons\nNo controlling person shall be subject to a penalty under subsection (a)(1)(B) unless the Commission establishes that\u2014\n(A) such controlling person knew or recklessly disregarded the fact that such controlled person was likely to engage in the act or acts constituting the violation and failed to take appropriate steps to prevent such act or acts before they occurred; or\n(B) such controlling person knowingly or recklessly failed to establish, maintain, or enforce any policy or procedure required under section 78\no\n1\n1 See References in Text note below.\nsection 80b\u20134a of this title\n(2)\nAdditional restrictions on liability\nNo person shall be subject to a penalty under subsection (a) solely by reason of employing another person who is subject to a penalty under such subsection, unless such employing person is liable as a controlling person under paragraph (1) of this subsection.\nSection 78t(a) of this title\n(c)\nAuthority of Commission\nThe Commission, by such rules, regulations, and orders as it considers necessary or appropriate in the public interest or for the protection of investors, may exempt, in whole or in part, either unconditionally or upon specific terms and conditions, any person or transaction or class of persons or transactions from this section.\n(d)\nProcedures for collection\n(1)\nPayment of penalty to Treasury\nA penalty imposed under this section shall be payable into the Treasury of the United States, except as otherwise provided in\nsection 7246 of this title\nsection 78u\u20136 of this title\n(2)\nCollection of penalties\nIf a person upon whom such a penalty is imposed shall fail to pay such penalty within the time prescribed in the court\u2019s 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.\n(3)\nRemedy not exclusive\nThe actions authorized by this section may be brought in addition to any other actions that the Commission or the Attorney General are entitled to bring.\n(4)\nJurisdiction and venue\nFor purposes of\nsection 78aa of this title\n(5)\nStatute of limitations\nNo action may be brought under this section more than 5 years after the date of the purchase or sale. This section shall not be construed to bar or limit in any manner any action by the Commission or the Attorney General under any other provision of this chapter, nor shall it bar or limit in any manner any action to recover penalties, or to seek any other order regarding penalties, imposed in an action commenced within 5 years of such transaction.\n(e)\nDefinition\nFor purposes of this section, \u201cprofit gained\u201d or \u201closs avoided\u201d is the difference between the purchase or sale price of the security and the value of that security as measured by the trading price of the security a reasonable period after public dissemination of the nonpublic information.\n(f)\nLimitation on Commission authority\nThe authority of the Commission under this section with respect to security-based swap agreements shall be subject to the restrictions and limitations of\nsection 78c\u20131(b) of this title\n(g)\nDuty of Members and employees of Congress\n(1)\nIn general\nSubject to the rule of construction under section 10 of the STOCK Act and solely for purposes of the insider trading prohibitions arising under this chapter, including\nsection 78j(b) of this title\n(2)\nDefinitions\nIn this subsection\u2014\n(A) the term \u201cMember of Congress\u201d means a member of the Senate or House of Representatives, a Delegate to the House of Representatives, and the Resident Commissioner from Puerto Rico; and\n(B) the term \u201cemployee of Congress\u201d means\u2014\n(i) any individual (other than a Member of Congress), whose compensation is disbursed by the Secretary of the Senate or the Chief Administrative Officer of the House of Representatives; and\n(ii) any other officer or employee of the legislative branch (as defined in\nsection 13101(11) of title 5\n(3)\nRule of construction\nNothing in this subsection shall be construed to impair or limit the construction of the existing antifraud provisions of the securities laws or the authority of the Commission under those provisions.\n(h)\nDuty of other Federal officials\n(1)\nIn general\nSubject to the rule of construction under section 10 of the STOCK Act and solely for purposes of the insider trading prohibitions arising under this chapter, including\nsection 78j(b) of this title\n(2)\nDefinitions\nIn this subsection\u2014\n(A) the term \u201cexecutive branch employee\u201d\u2014\n(i) has the meaning given the term \u201cemployee\u201d under\nsection 2105 of title 5\n(ii) includes\u2014\n(I) the President;\n(II) the Vice President; and\n(III) an employee of the United States Postal Service or the Postal Regulatory Commission;\n(B) the term \u201cjudicial employee\u201d has the meaning given that term in\nsection 13101(9) of title 5\n(C) the term \u201cjudicial officer\u201d has the meaning given that term under\nsection 13101(10) of title 5\n(3)\nRule of construction\nNothing in this subsection shall be construed to impair or limit the construction of the existing antifraud provisions of the securities laws or the authority of the Commission under those provisions.\n(i)\nParticipation in initial public offerings\nAn individual described in\nsection 13103(f) of title 5\nl","url":"https://projectusc.org/usc/t15/s78u\u20131.html","content":[{"t":"sec","id":"/us/usc/t15/s78u\u20131","children":[{"t":"num","text":"\u00a7\u202f78u\u20131."},{"t":"heading","text":"Civil penalties for insider trading"},{"t":"subsec","id":"/us/usc/t15/s78u\u20131/a","children":[{"t":"num","text":"(a)"},{"t":"heading","text":"Authority to impose civil penalties"},{"t":"para","id":"/us/usc/t15/s78u\u20131/a/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Judicial actions by Commission authorized"},{"t":"chapeau","text":"Whenever it shall appear to the Commission that any person has violated any provision of this chapter or the rules or regulations thereunder by purchasing or selling a security or security-based swap agreement while in possession of material, nonpublic information in, or has violated any such provision by communicating such information in connection with, a transaction on or through the facilities of a national securities exchange or from or through a broker or dealer, and which is not part of a public offering by an issuer of securities other than standardized options or security futures products, the Commission\u2014"},{"t":"subpara","id":"/us/usc/t15/s78u\u20131/a/1/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" may bring an action in a United States district court to seek, and the court shall have jurisdiction to impose, a civil penalty to be paid by the person who committed such violation; and","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t15/s78u\u20131/a/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" may, subject to subsection (b)(1), bring an action in a United States district court to seek, and the court shall have jurisdiction to impose, a civil penalty to be paid by a person who, at the time of the violation, directly or indirectly controlled the person who committed such violation.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t15/s78u\u20131/a/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Amount of penalty for person who committed violation"},{"t":"content","children":[{"t":"p","text":"The amount of the penalty which may be imposed on the person who committed such violation shall be determined by the court in light of the facts and circumstances, but shall not exceed three times the profit gained or loss avoided as a result of such unlawful purchase, sale, or communication.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t15/s78u\u20131/a/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Amount of penalty for controlling person"},{"t":"content","children":[{"t":"p","text":"The amount of the penalty which may be imposed on any person who, at the time of the violation, directly or indirectly controlled the person who committed such violation, shall be determined by the court in light of the facts and circumstances, but shall not exceed the greater of $1,000,000, or three times the amount of the profit gained or loss avoided as a result of such controlled person\u2019s violation. If such controlled person\u2019s violation was a violation by communication, the profit gained or loss avoided as a result of the violation shall, for purposes of this paragraph only, be deemed to be limited to the profit gained or loss avoided by the person or persons to whom the controlled person directed such communication.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t15/s78u\u20131/b","children":[{"t":"num","text":"(b)"},{"t":"heading","text":"Limitations on liability"},{"t":"para","id":"/us/usc/t15/s78u\u20131/b/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Liability of controlling persons"},{"t":"chapeau","text":"No controlling person shall be subject to a penalty under subsection (a)(1)(B) unless the Commission establishes that\u2014"},{"t":"subpara","id":"/us/usc/t15/s78u\u20131/b/1/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" such controlling person knew or recklessly disregarded the fact that such controlled person was likely to engage in the act or acts constituting the violation and failed to take appropriate steps to prevent such act or acts before they occurred; or","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t15/s78u\u20131/b/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" such controlling person knowingly or recklessly failed to establish, maintain, or enforce any policy or procedure required under section 78","children":[{"t":"text","text":"o","tail":"(f)\u202f"},{"t":"ref","text":"1"},{"t":"num","text":"1","tail":"\u202fSee References in Text note below."},{"t":"text","text":"\u202fSee References in Text note below.","tail":" of this title or "},{"t":"ref","text":"section 80b\u20134a of this title","href":"/us/usc/t15/s80b\u20134a","tail":" and such failure substantially contributed to or permitted the occurrence of the act or acts constituting the violation."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t15/s78u\u20131/b/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Additional restrictions on liability"},{"t":"content","children":[{"t":"p","text":"No person shall be subject to a penalty under subsection (a) solely by reason of employing another person who is subject to a penalty under such subsection, unless such employing person is liable as a controlling person under paragraph (1) of this subsection. ","children":[{"t":"ref","text":"Section 78t(a) of this title","href":"/us/usc/t15/s78t/a","tail":" shall not apply to actions under subsection (a) of this section."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t15/s78u\u20131/c","children":[{"t":"num","text":"(c)"},{"t":"heading","text":"Authority of Commission"},{"t":"content","children":[{"t":"p","text":"The Commission, by such rules, regulations, and orders as it considers necessary or appropriate in the public interest or for the protection of investors, may exempt, in whole or in part, either unconditionally or upon specific terms and conditions, any person or transaction or class of persons or transactions from this section.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t15/s78u\u20131/d","children":[{"t":"num","text":"(d)"},{"t":"heading","text":"Procedures for collection"},{"t":"para","id":"/us/usc/t15/s78u\u20131/d/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Payment of penalty to Treasury"},{"t":"content","children":[{"t":"p","text":"A penalty imposed under this section shall be payable into the Treasury of the United States, except as otherwise provided in ","children":[{"t":"ref","text":"section 7246 of this title","href":"/us/usc/t15/s7246","tail":" and "},{"t":"ref","text":"section 78u\u20136 of this title","href":"/us/usc/t15/s78u\u20136","tail":"."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t15/s78u\u20131/d/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Collection of penalties"},{"t":"content","children":[{"t":"p","text":"If a person upon whom such a penalty is imposed shall fail to pay such penalty within the time prescribed in the court\u2019s 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.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t15/s78u\u20131/d/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Remedy not exclusive"},{"t":"content","children":[{"t":"p","text":"The actions authorized by this section may be brought in addition to any other actions that the Commission or the Attorney General are entitled to bring.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t15/s78u\u20131/d/4","children":[{"t":"num","text":"(4)"},{"t":"heading","text":"Jurisdiction and venue"},{"t":"content","children":[{"t":"p","text":"For purposes of ","children":[{"t":"ref","text":"section 78aa of this title","href":"/us/usc/t15/s78aa","tail":", actions under this section shall be actions to enforce a liability or a duty created by this chapter."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t15/s78u\u20131/d/5","children":[{"t":"num","text":"(5)"},{"t":"heading","text":"Statute of limitations"},{"t":"content","children":[{"t":"p","text":"No action may be brought under this section more than 5 years after the date of the purchase or sale. This section shall not be construed to bar or limit in any manner any action by the Commission or the Attorney General under any other provision of this chapter, nor shall it bar or limit in any manner any action to recover penalties, or to seek any other order regarding penalties, imposed in an action commenced within 5 years of such transaction.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t15/s78u\u20131/e","children":[{"t":"num","text":"(e)"},{"t":"heading","text":"Definition"},{"t":"content","children":[{"t":"p","text":"For purposes of this section, \u201cprofit gained\u201d or \u201closs avoided\u201d is the difference between the purchase or sale price of the security and the value of that security as measured by the trading price of the security a reasonable period after public dissemination of the nonpublic information.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t15/s78u\u20131/f","children":[{"t":"num","text":"(f)"},{"t":"heading","text":"Limitation on Commission authority"},{"t":"content","children":[{"t":"p","text":"The authority of the Commission under this section with respect to security-based swap agreements shall be subject to the restrictions and limitations of ","children":[{"t":"ref","text":"section 78c\u20131(b) of this title","href":"/us/usc/t15/s78c\u20131/b","tail":"."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t15/s78u\u20131/g","children":[{"t":"num","text":"(g)"},{"t":"heading","text":"Duty of Members and employees of Congress"},{"t":"para","id":"/us/usc/t15/s78u\u20131/g/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"In general"},{"t":"content","children":[{"t":"p","text":"Subject to the rule of construction under section 10 of the STOCK Act and solely for purposes of the insider trading prohibitions arising under this chapter, including ","children":[{"t":"ref","text":"section 78j(b) of this title","href":"/us/usc/t15/s78j/b","tail":" and Rule 10b\u20135 thereunder, each Member of Congress or employee of Congress owes a duty arising from a relationship of trust and confidence to the Congress, the United States Government, and the citizens of the United States with respect to material, nonpublic information derived from such person\u2019s position as a Member of Congress or employee of Congress or gained from the performance of such person\u2019s official responsibilities."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t15/s78u\u20131/g/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Definitions"},{"t":"chapeau","text":"In this subsection\u2014"},{"t":"subpara","id":"/us/usc/t15/s78u\u20131/g/2/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" the term \u201cMember of Congress\u201d means a member of the Senate or House of Representatives, a Delegate to the House of Representatives, and the Resident Commissioner from Puerto Rico; and","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t15/s78u\u20131/g/2/B","children":[{"t":"num","text":"(B)"},{"t":"chapeau","text":" the term \u201cemployee of Congress\u201d means\u2014"},{"t":"clause","id":"/us/usc/t15/s78u\u20131/g/2/B/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" any individual (other than a Member of Congress), whose compensation is disbursed by the Secretary of the Senate or the Chief Administrative Officer of the House of Representatives; and","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t15/s78u\u20131/g/2/B/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" any other officer or employee of the legislative branch (as defined in ","children":[{"t":"ref","text":"section 13101(11) of title 5","href":"/us/usc/t5/s13101/11","tail":")."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t15/s78u\u20131/g/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Rule of construction"},{"t":"content","children":[{"t":"p","text":"Nothing in this subsection shall be construed to impair or limit the construction of the existing antifraud provisions of the securities laws or the authority of the Commission under those provisions.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t15/s78u\u20131/h","children":[{"t":"num","text":"(h)"},{"t":"heading","text":"Duty of other Federal officials"},{"t":"para","id":"/us/usc/t15/s78u\u20131/h/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"In general"},{"t":"content","children":[{"t":"p","text":"Subject to the rule of construction under section 10 of the STOCK Act and solely for purposes of the insider trading prohibitions arising under this chapter, including ","children":[{"t":"ref","text":"section 78j(b) of this title","href":"/us/usc/t15/s78j/b","tail":", and Rule 10b\u20135 thereunder, each executive branch employee, each judicial officer, and each judicial employee owes a duty arising from a relationship of trust and confidence to the United States Government and the citizens of the United States with respect to material, nonpublic information derived from such person\u2019s position as an executive branch employee, judicial officer, or judicial employee or gained from the performance of such person\u2019s official responsibilities."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t15/s78u\u20131/h/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Definitions"},{"t":"chapeau","text":"In this subsection\u2014"},{"t":"subpara","id":"/us/usc/t15/s78u\u20131/h/2/A","children":[{"t":"num","text":"(A)"},{"t":"chapeau","text":" the term \u201cexecutive branch employee\u201d\u2014"},{"t":"clause","id":"/us/usc/t15/s78u\u20131/h/2/A/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" has the meaning given the term \u201cemployee\u201d under ","children":[{"t":"ref","text":"section 2105 of title 5","href":"/us/usc/t5/s2105","tail":";"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t15/s78u\u20131/h/2/A/ii","children":[{"t":"num","text":"(ii)"},{"t":"chapeau","text":" includes\u2014"},{"t":"subclause","id":"/us/usc/t15/s78u\u20131/h/2/A/ii/I","children":[{"t":"num","text":"(I)"},{"t":"content","text":" the President;","tail":"\n"}],"tail":"\n"},{"t":"subclause","id":"/us/usc/t15/s78u\u20131/h/2/A/ii/II","children":[{"t":"num","text":"(II)"},{"t":"content","text":" the Vice President; and","tail":"\n"}],"tail":"\n"},{"t":"subclause","id":"/us/usc/t15/s78u\u20131/h/2/A/ii/III","children":[{"t":"num","text":"(III)"},{"t":"content","text":" an employee of the United States Postal Service or the Postal Regulatory Commission;","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t15/s78u\u20131/h/2/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" the term \u201cjudicial employee\u201d has the meaning given that term in ","children":[{"t":"ref","text":"section 13101(9) of title 5","href":"/us/usc/t5/s13101/9","tail":"; and"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t15/s78u\u20131/h/2/C","children":[{"t":"num","text":"(C)"},{"t":"content","text":" the term \u201cjudicial officer\u201d has the meaning given that term under ","children":[{"t":"ref","text":"section 13101(10) of title 5","href":"/us/usc/t5/s13101/10","tail":"."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t15/s78u\u20131/h/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Rule of construction"},{"t":"content","children":[{"t":"p","text":"Nothing in this subsection shall be construed to impair or limit the construction of the existing antifraud provisions of the securities laws or the authority of the Commission under those provisions.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t15/s78u\u20131/i","children":[{"t":"num","text":"(i)"},{"t":"heading","text":"Participation in initial public offerings"},{"t":"content","children":[{"t":"p","text":"An individual described in ","children":[{"t":"ref","text":"section 13103(f) of title 5","href":"/us/usc/t5/s13103/f","tail":" may not purchase securities that are the subject of an initial public offering (within the meaning given such term in section 78"},{"t":"text","text":"l","tail":"(f)(1)(G)(i) of this title) in any manner other than is available to members of the public generally."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"text","text":"\n"},{"t":"text","text":"\n"}]}]}