[Code of Federal Regulations]
[Title 17, Volume 2]
[Revised as of April 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR202.9]

[Page 200]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER II--SECURITIES AND EXCHANGE COMMISSION
 
PART 202--INFORMAL AND OTHER PROCEDURES--Table of Contents
 
Sec. 202.9  Small entity enforcement penalty reduction policy.

    The Commission's policy with respect to whether to reduce or assess 
civil money penalties against a small entity is:
    (a) The Commission will consider on a case-by-case basis whether to 
reduce or not assess civil money penalties against a small entity. In 
determining whether to reduce or not assess penalties against a specific 
small entity, the following considerations will apply:
    (1) Except as provided in paragraph (a)(3) of this section, penalty 
reduction will not be available for any small entity if:
    (i) The small entity was subject previously to an enforcement 
action;
    (ii) Any of the small entity's violations involved willful or 
criminal conduct; or
    (iii) The small entity did not make a good faith effort to comply 
with the law.
    (2) In considering whether the Commission will reduce or refrain 
from assessing a civil money penalty, the Commission may consider:
    (i) The egregiousness of the violations;
    (ii) The isolated or repeated nature of the violations;
    (iii) The violator's state of mind when committing the violations;
    (iv) The violator's history (if any) of legal or regulatory 
violations;
    (v) The extent to which the violator cooperated during the 
investigation;
    (vi) Whether the violator has engaged in subsequent remedial efforts 
to mitigate the effects of the violation and to prevent future 
violations;
    (vii) The degree to which a penalty will deter the violator or 
others from committing future violations; and
    (viii) Any other relevant fact.
    (3) The Commission also may consider whether to reduce or not assess 
a civil money penalty against a small entity, including a small entity 
otherwise excluded from this policy under paragraphs (a)(1) (i)-(iii) of 
this section, if the small entity can demonstrate to the Commission's 
satisfaction that it is financially unable to pay the penalty, 
immediately or over a reasonable period of time, in whole or in part.
    (4) For purposes of this policy, an entity qualifies as ``small'' if 
it is a small business or small organization as defined by Commission 
rules adopted for the purpose of compliance with the Regulatory 
Flexibility Act.1 An entity not included in these definitions 
will be considered ``small'' for purposes of this policy if it meets the 
total asset amount that applies to issuers as set forth in Sec. 230.157a 
of this chapter.2
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    \1\ Pursuant to the Reg. Flex. Act, 5 U.S.C. Sec. 601(3), the 
Commission has adopted appropriate definitions of ``small business'' for 
purposes of the Reg. Flex. Act. See 17 CFR 270.0-10, 275.0-7, 240.0-10, 
230.157, 250.110, and 260.0-7. The Commission recently proposed 
amendments to certain of these definitions. Definitions of ``Small 
Business'' or ``Small Organization'' Under the Investment Company Act of 
1940, the Investment Advisers Act of 1940, the Securities Exchange Act 
of 1934, and the Securities Act of 1933, Securities Act Rel. No. 7383, 
62 FR 4106 (Jan. 28, 1997). The Commission extended the comment period 
for the proposed amendments to April 30, 1997, 62 FR 13356 (Mar. 20, 
1997). Based on an analysis of the language and legislative history of 
the Reg. Flex. Act, Congress does not appear to have intended that Act 
to apply to natural persons (as opposed to individual proprietorships) 
or to foreign entities. The Commission understands that staff at the 
Small Business Administration have taken the same position.
    \2\ At present, this threshold is $5 million. Thus, non-regulated 
entities, such as general partnerships, privately held corporations or 
professional service organizations, with assets of $5 million or less 
may qualify for penalty-reduction.
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    (b) This policy does not create a right or remedy for any person. 
This policy shall not apply to any remedy that may be sought by the 
Commission other than civil money penalties, whether or not such other 
remedy may be characterized as penal or remedial.

[62 FR 16079, Apr. 4, 1997]