Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Tuesday, May 20, 2008

D.C. District Court Finds Courts Cannot Impose Penalties for Aiding & Abetting Advisers Act Violations

In what the court describes as a "case of first impression," the federal district court for the District of Columbia held that the SEC does not have the authority to seek, and the court lacks jurisdiction to impose, monetary penalties for aiding and abetting violations of the Investment Advisers Act of 1940.  The court relied on the plain meaning of Section 209(e) of the Advisers Act, which provides that civil penalties can be imposed on "the person who committed" a violation of the Act.  The court deemed the statute's failure to authorize explicitly monetary penalties for aiding and abetting violations of the Advisers Act dispositive.  It rejected the SEC's argument that this interpretation made no sense because it would mean that the SEC could only obtain monetary penalties against aiders and abettors under the Advisers Act in administrative proceedings and would require the agency to bring both an administrative and judicial proceeding where it sought both a monetary penalty and injunctive relief.  It also rejected the SEC's proffer of judicial decisions where the district courts imposed civil penalties for aiding and abetting Advisers Act violations, finding that none of them had actually analyzed the issue of the availability of the remedy.  SEC v. Bolla, 2008 WL 1959502 (D.D.C. May 6, 2008).

http://lawprofessors.typepad.com/securities/2008/05/dc-district-cou.html

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