Estimate SEC civil penalties by tier using worksheet reference amounts. Calculate Tier I, II, and III scenarios including disgorgement and prejudgment interest assumptions.
The SEC Penalty Estimator calculates potential civil penalty scenarios based on a three-tier worksheet structure. Tier I applies to any violation, Tier II involves fraud, deceit, or manipulation, and Tier III covers violations causing substantial losses or risk of losses to others.
Beyond civil penalties, SEC enforcement scenarios often include disgorgement and prejudgment interest assumptions. The total financial impact of a matter can far exceed the civil penalty alone.
This calculator helps securities professionals, compliance officers, and legal counsel estimate total exposure by modeling penalties, disgorgement amounts, and interest across different scenarios.
Understanding the three-tier structure and disgorgement assumptions helps firms budget for potential enforcement actions and justify compliance investments. Treat the page as a worksheet, not as a live-law source.
Civil Penalty = Per-Violation Maximum x Number of Violations Disgorgement = Ill-Gotten Gains Prejudgment Interest = Disgorgement x IRS Underpayment Rate x Years Total = Civil Penalty + Disgorgement + Prejudgment Interest
Result: $6,903,156 total exposure
Tier III entity reference maximum: $1,153,156 per violation. Disgorgement: $5,000,000. Prejudgment interest at 5% for 3 years: $750,000. Total: $1,153,156 + $5,000,000 + $750,000 = $6,903,156.
The SEC focuses enforcement on insider trading, accounting fraud, market manipulation, investment adviser misconduct, and cybersecurity disclosure failures.
The SEC may give credit for self-reporting, cooperation, and remediation in real matters. This worksheet does not attempt to model the final enforcement decision.
Companies should budget for potential enforcement costs including legal fees, document production, penalties, and operational disruption. Large investigations can be expensive even before any civil penalty is assessed.
Last updated:
This worksheet multiplies a tier-specific per-violation maximum by the number of violations and then adds modeled disgorgement and prejudgment interest. It is intended to compare scenarios, not to decide whether the SEC would seek a particular tier, whether disgorgement is available in a specific case, or whether any credit should apply for cooperation, self-reporting, or remediation.
Tier I applies to any securities violation, Tier II involves fraud, deceit, or manipulation, and Tier III involves the same plus substantial losses or risk. This worksheet uses reference amounts, not a live SEC schedule.
Disgorgement requires violators to return profits gained through illegal activity. The Supreme Court ruled it cannot exceed the violator's net profits and is subject to a 5-year statute of limitations in most cases.
The SEC typically uses the IRS underpayment rate to calculate prejudgment interest on disgorgement amounts. Interest accrues from the date of the violation until the date of the order, compounded quarterly.
Yes, the SEC can seek penalties up to the gross pecuniary gain from the violation if that amount exceeds the standard per-violation maximum. This alternative calculation often applies in cases involving large profits.
Mitigating factors include self-reporting, full cooperation, remediation, no prior violations, and the strength of the compliance program. The SEC's cooperation program provides formal credit for companies that assist investigations.
Generally no. The Tax Cuts and Jobs Act of 2017 explicitly disallowed deductions for fines and penalties paid to government agencies. However, some disgorgement amounts may have different tax treatment. Consult a tax professional.