Jocelyn M. Murphy, et al. v. Securities and Exchange Commission

The Securities Exchange Act of 1934 empowers Respondent Securities and Exchange Commission (“SEC”) to seek, and district courts to impose, putatively “civil” penalties against securities law violators. As relevant here, the Act caps those penalties at specific dollar amounts “for each violation,” but does not define what “each violation” means. Given this void, SEC and courts have adopted a variety of conflicting methodologies for counting the number of violations in any given case, resulting in penalties that vastly exceed the ostensible statutory caps set by Congress. The district court here used two different methodologies in assessing penalties against the three Petitioners (which were inconsistent with the methodologies the court used in assessing penalties against settling co-defendants). For two Petitioners, the court multiplied the statutory cap by the number of months they were unregistered with SEC as securities brokers, resulting in total penalties more than 40 and 30 times higher, respectively, than the statutory cap. For the third Petitioner, the court imposed no penalty for failing to register as a broker but multiplied the statutory cap for a separate fraudbased violation by the number of times she allegedly submitted misleading information to certain SECregistered brokers, resulting in total penalties more than 17 times the statutory cap for fraud-based violations. The Ninth Circuit affirmed in all respects.