Penalty-Reduction Policy for Small Entities

SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 202

[Release Nos. 33-7408, 34-38447, 35-26696, 39-2350, IC-22588, and IA-

1625; File No. S7-14-97]

Penalty-Reduction Policy for Small Entities

AGENCY: Securities and Exchange Commission.

ACTION: Policy statement; request for comments.

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SUMMARY: The Securities and Exchange Commission is issuing a statement

of its penalty-reduction policy for small entities as required by the

Small Business Regulatory Enforcement Fairness Act, Pub. L. No. 104-

121, 110 Stat. 857 (1996). The Commission also requests comments on the

policy. After the comment period has closed and the Commission has

gained experience in applying the policy, the Commission intends to re-

evaluate the policy in light of its experience and the comments of

interested persons.

DATES: Effective March 29, 1997. Interested persons may submit comments

on the policy on or before December 31, 1997.

ADDRESSES: Interested persons should submit three copies of their

written data, views, and opinions to Jonathan G. Katz, Secretary,

Securities and Exchange Commission, 450 Fifth St. N.W., Washington,

D.C. 20549. Comment letters also may be submitted electronically to the

following electronic mail address: [email protected]. All comment

letters should refer to File No. S7-14-97; this file number should be

included on the subject line if E:mail is used. All comment letters

will be made available for public inspection and copying at the

Commission's Public Reference Room, Room 1024, 450 Fifth St., N.W.,

Washington, D.C. 20549. Electronically submitted comment letters will

be posted on the Commission's Internet Web site (http://www.sec.gov).

FOR FURTHER INFORMATION CONTACT: Joan McKown (202-942-4530) or Susan

Mathews (202-942-4737), Office of the Chief Counsel, Division of

Enforcement, or Amy Kroll (202-942-0927) or Anne Sullivan (202-942-

0954), Office of the General Counsel.

SUPPLEMENTARY INFORMATION: The Small Business Regulatory Fairness Act

(``SBREFA'' or ``the Act'') was enacted on March 29, 1996.1 SBREFA

seeks to improve the regulatory climate for small entities 2 by,

among other things:

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\1\ Pub. L. No. 104-121, 110 Stat. 857 (codified in scattered

sections of 5 U.S.C., 15 U.S.C. and as a note to 5 U.S.C. Sec. 601)

(1996).

\2\ The definition of ``small entity'' under SBREFA is the same

as the definition of ``small entity'' under the Regulatory

Flexibility Act, 5 U.S.C. Sec. 601 et seq. (``Reg. Flex. Act'').

SBREFA Sec. 221(1). The Reg. Flex. Act defines ``small entity'' to

include ``small business.'' 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 infra

n.10.

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Expanding the extent to which the rule making process must

include evaluation of the impact of proposed rules (and rule changes)

on small entities; 3

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\3\ 5 U.S.C. Secs. 603(a), 604, and 605(b), codifying SBREFA

Secs. 241 and 243.

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[[Page 16077]]

Expanding the rights of action for small businesses to

seek judicial review of rules impacting small entities; 4

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\4\ 5 U.S.C. Sec. 611, codifying SBREFA Sec. 242.

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Requiring agencies to establish small entity penalty

reduction or waiver policies; 5 and

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\5\ SBREFA Sec. 223.

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Directing agencies to expand their efforts to provide

formal and informal guidance to small entities.6

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\6\ SBREFA Secs. 212, 213, 214 (codified at 15 U.S.C.

Sec. 648(c)(3)), and 215. In a companion release, the Commission is

adopting an informal guidance program as required by SBREFA.

Informal Guidance Program for Small Entities, Securities Act Rel.

No. 33-7407 (Mar. 27, 1997). The Commission previously, on January

28, 1997, adopted small entity compliance guides as required by

SBREFA. Securities Act Rel. No. 7342, 62 FR 4104 ( Jan. 28, 1997)

(codified at 17 CFR 202.8).

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In this release, the Commission announces a small entity penalty-

reduction policy (``Penalty-Reduction Policy'' or ``Policy'') as

mandated by SBREFA and solicits comment on the Policy.

SBREFA provides a general standard for penalty-reduction policies:

Each agency regulating the activities of small entities shall

establish a policy or program within 1 year of enactment of this

section to provide for the reduction, and, under appropriate

circumstances for the waiver, of civil penalties for violations of a

statutory or regulatory requirement by a small entity. Under

appropriate circumstances, an agency may consider ability to pay in

determining penalty assessments on small entities.7

\7\ SBREFA Sec. 223(a). SBREFA also establishes that ``[i]n any

civil or administrative action against a small entity, guidance

given by an agency applying the law to facts provided by the small

entity may be considered as evidence of the reasonableness or

appropriateness of any proposed fines, penalties or damages sought

against such small entity.'' Id. Sec. 213(a).

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A statement entered into the Congressional Record after enactment

of SBREFA explains that agencies have ``flexibility to tailor their

specific programs to their missions and charters'' and instructs

agencies ``to develop the boundaries of their program and the specific

circumstances for providing for a waiver or reduction of penalties.''

8 To that end, SBREFA specifies that a penalty-reduction policy

adopted by an agency may be subject to the requirements or limitations

of other applicable statutes. SBREFA also lists six possible exclusions

or conditions that an agency may incorporate in its policy.9

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\8\ ``Small Business Regulatory Enforcement Fairness Act--Joint

Managers Statement of Legislative History and Congressional

Intent,'' 142 Cong. Rec. S3244 (daily ed. Mar. 29, 1996).

\9\ SBREFA Sec. 223(b).

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The Commission has reviewed the current requirements of the federal

securities laws, its current practice in assessing penalties on small

entities, and the appropriate conditions and exclusions for a penalty-

reduction policy for small entities that violate the federal securities

laws. On the basis of that review, the Commission announces its

Penalty-Reduction Policy for small entities. Although the Commission's

informal practice has been to consider some or all of the factors

contained in the policy in its penalty analysis for all entities, in

accord with the mandates of SBREFA, the Commission sets forth in this

release a formal policy specifically for small entities that embodies

these factors. The Commission also invites comments on this Policy.

I. Penalty-Reduction Policy

A. Text of Policy

The text of the policy follows:

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) below, 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) above, 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.10 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 Rule 157(a) of the Securities Act of 1933.11

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\10\ 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. 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 (SBA) have taken the same position.

Telephone conversation with Gregory J. Dean, Jr., Assistant Chief

Counsel for Finance and Programs, SBA Office of Advocacy (Mar. 13,

1997). 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).

\11\ 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) The foregoing 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.

B. Penalties Eligible for Reduction

The Policy will apply only to civil money penalties. It will not

apply to any remedy that the Commission may seek other than civil money

penalties, whether or not such other remedy may be characterized as

penal or remedial.12 SBREFA provides that an agency may consider

an entity's ``ability to pay,'' and requires agencies to report to

Congress on the ``total amount of penalty reductions.'' The Commission

interprets these statements to refer to civil money penalties.

Committee statements that were included in the Congressional Record

after enactment of SBREFA also support limiting penalty reduction

policies to civil money penalties.13 Moreover, an Environmental

Protection Agency (``EPA'') policy cited

[[Page 16078]]

in the statements as an example of an appropriate policy is limited to

civil money penalties.14

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\12\ See Johnson v. SEC, 87 F.3d 484 (D.C. Cir. 1996) (six-month

suspension from supervisory positions at broker-dealers constitutes

a penalty for the purposes of 28 U.S.C. Sec. 2462).

\13\ ``Small Business Regulatory Enforcement Fairness Act: Views

of the House Committees of Jurisdiction on the Congressional Intent

Regarding the `Small Business Regulatory Enforcement Fairness Act of

1996,' '' 142 Cong. Rec. E572 (daily ed. Apr. 19, 1996); 142 Cong.

Rec. at S3244.

\14\ See EPA, Policy on Compliance Incentives for Small

Business, 61 FR 27984 (June 3, 1996).

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C. Other Relevant Statutes

The Policy is consistent with the statutory provisions in the

Securities Enforcement Remedies and Penny Stock Act of 1990,15 the

Insider Trading Sanctions Act of 1984,16 and other statutes

17 that grant the Commission the authority to impose civil money

penalties for a broad range of violations of the federal securities

laws.18 These Acts give the Commission flexibility to tailor

sanctions and recommend factors that guide the Commission's discretion

in imposing money penalties. Although each decision is based on fact-

specific circumstances, with respect to each violator the Commission

presently may consider: (1) the violator's financial ability to pay a

penalty; (2) whether the violator is a repeat offender; (3) cooperation

provided during the investigation; (4) subsequent remedial efforts; (5)

whether the violation was willful; (6) the degree to which a penalty

will deter future violations; and (7) any other relevant fact.19

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\15\ Pub. L. 101-429, 104 Stat. 931 (1990) (codified in

scattered sections of 15 U.S.C.) (``Remedies Act'').

\16\ Pub. L. No. 98-376, 98 Stat. 1264 (1984) (codified in

scattered sections of 15 U.S.C.) (``Insider Trading Act'').

\17\ See, e.g., Insider Trading and Securities Fraud Enforcement

Act of 1988, Pub. L. No. 100-704, 102 Stat. 4677 (1988) (codified in

scattered sections of 15 U.S.C.).

\18\ See section 20(d)(2) of the Securities Act of 1933 (civil

actions) (15 U.S.C. 77t(d)(2)); sections 21(d)(3) (civil actions),

21A (insider trading actions), and 21B (administrative proceedings)

of the Securities Exchange Act of 1934 (``Exchange Act'') (15 U.S.C.

Secs. 78u(d)(3), 78u-1, and 78u-2); sections 203(i)(2)

(administrative proceedings) and 209(e) (civil actions) of the

Investment Advisers Act of 1940 (15 U.S.C. Secs. 80b-3(i)(2) and

80b-9(e)); and sections 9(d) (administrative proceedings) and 42(e)

(civil actions) of the Investment Company Act of 1940 (15 U.S.C.

Secs. 80a-9(d) and 80a-41(e)).

\19\ See, e.g., section 21B(c)(1)-(6) of the Exchange Act (15

U.S.C. Sec. 78u-2(c)(1)-(6)); see also SEC v. Brumfield et al., SEC

Lit. Rel. No. 14,956 (June 20, 1996) (penalty not imposed in light

of respondent's cooperation).

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D. Exclusions From and Conditions to the Penalty-Reduction Policy

Section 223(b) of SBREFA lists six possible exclusions or

conditions that agencies may incorporate in their penalty-reduction

policies, some of which are similar to those factors the Commission may

consider when fashioning a penalty under the statutes described above.

For the reasons discussed below, the Commission incorporates in the

Policy three of the suggested exclusions, which are contained in

paragraph (a)(1) of the Policy, but does not incorporate the other

three.

1. Multiple Enforcement Actions

SBREFA permits an agency to exclude from its policy small entities

that have been subject to multiple enforcement actions. The Commission

historically has made a similar determination under Section 21B(c) of

the Exchange Act when considering whether a penalty is in the public

interest.20 The Commission believes it is appropriate to deny

access to the Penalty-Reduction Policy to small entities against which

the Commission previously has filed an action. Therefore, the Policy

contains this exclusion.

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\20\ Under this section, the Commission will consider whether

the entity previously violated the federal or state securities laws

or rules.

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2. Willful or Criminal Conduct

SBREFA permits an agency to exclude from its policy a small entity

whose violation involves willful or criminal conduct. Thomas J. Bliley,

Jr., Chairman of the House Commerce Committee, explained in a statement

entered into the Congressional Record after enactment of SBREFA that:

We will not tolerate, and this bill does not create, any free

pass for financial fraud. Specifically, Section 323(b)(4) of the

bill expressly excludes ``violations involving willful or criminal

conduct'' from the small business enforcement variance. In the

context of the federal securities laws, I understand ``willful'' to

have the longstanding judicial construction as expressed in, for

example, Tager v. Securities and Exchange Commission, 344 F.2d 5, 7

(2d. Cir. 1965).21

\21\ ``Contract with America Advancement Act of 1996,'' Speech

of Hon. Thomas J. Bliley, Jr., 142 Cong. Rec. E591-92 (daily ed.

Apr. 19, 1996).

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Consistent with Chairman Bliley's statement, the Policy is not

available to small entities if their violations involve willful or

criminal conduct.

3. Good Faith Compliance

SBREFA permits an agency to require that a small entity has made a

good faith effort to comply with the law in order for the small entity

to avail itself of the penalty reduction policy. The Policy contains

this exclusion. Under the Policy, a small entity may qualify for

penalty reduction only if the Commission has not alleged that its

actions were undertaken in bad faith and if the entity proffers

evidence satisfactory to the Commission that it made a ``good faith''

effort to comply with the securities laws.

4. Reasonable Correction Period

SBREFA permits an agency to condition the availability of penalty

reduction on a small entity's correction of a violation within a

reasonable time period. If a small entity violates the securities laws,

the violation cannot be ``undone.'' Rather, the Commission's

enforcement program focuses on stopping current violative conduct or

preventing future conduct through the use of injunctions and temporary

restraining orders, and by recovering ill-gotten gains in the form of

disgorgement or by requiring undertakings to improve compliance

procedures at firms. The Office of Compliance Inspections and

Examinations (``OCIE'') issues deficiency letters to regulated entities

found to have weaknesses in their compliance systems and or to have

violated applicable rules and regulations. Depending on the nature of

violations found, however, even if an entity corrects the violations,

OCIE may make an enforcement referral in an effort to deter future

violations by the entity. Because enforcement action is initiated when

a violation is particularly egregious, or when an entity has failed to

correct adequately its violations, penalty reduction for correcting a

violation that is the basis of an enforcement action would send the

wrong message to regulated entities. Consequently, the Commission is

not including this condition in the Policy.

5. Compliance Assistance Program

SBREFA also permits an agency to apply penalty reduction to

violations discovered through an entity's participation in a compliance

assistance or audit program operated or supported by the agency or a

state.22 Specifically, some agencies, for example the Occupational

Safety and Health Administration and EPA, have offices that will audit,

and pass judgment on, a regulated entity's compliance program. SBREFA

suggests that agencies could consider applying their penalty reduction

policies to small entity violations found in the course of such a

compliance audit. Although various divisions within the Commission

provide regulatory guidance, the Commission does not operate a formal

``compliance assistance or audit program.'' 23 Rather than specify

how every regulated entity should structure its compliance program, the

Commission sets standards and then relies on the ability of each

regulated entity, and when applicable its self-regulatory organization,

to determine how best to implement its compliance

[[Page 16079]]

program, based on the nature of its business. Because the Commission

does not have a compliance program of the type described in SBREFA,

this condition is not in the Policy. Notably, however, as a general

matter, the Commission does take into consideration compliance efforts

and gives appropriate weight to the existence of effective compliance

procedures both in making prosecutorial decisions regarding bringing

charges and in determining sanctions or penalties.

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\22\ SBREFA Sec. 223(b)(2).

\23\ Inspections and examinations by OCIE do not constitute

formal compliance assistance or audit programs.

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6. Health, Safety or Environmental Threats

Finally, SBREFA mentions excluding from a penalty reduction policy

those violations ``that pose serious health, safety or environmental

threats.'' The Commission does not regulate health, safety or

environmental entities. Therefore, this exclusion is not in the Policy.

E. Elements the Commission May Consider When Assessing Whether to

Reduce or Not Assess Penalties

Consistent with the Commission's practice and the statutes which

enable the Commission to assess money penalties, paragraph (a)(2) of

the Policy identifies eight elements the Commission may consider when

determining whether to reduce or not assess a civil money penalty

against a small entity. Although derived from considerations the

Commission already applies when determining whether, and the level at

which, to apply penalties,24 the Policy gives the Commission

discretion to consider any or all of these in any case where the Policy

may apply.

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\24\ See supra n.19 and accompanying text.

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F. Ability to Pay

SBREFA permits an agency to consider ability to pay in determining

penalty assessments on small entities.25 Since passage of the

Remedies Act in 1990, the Commission has complied with the spirit of

SBREFA, considering an entity's ability to pay before setting a penalty

amount. Generally, the Commission seeks money penalties in an amount

that, after careful examination of financial information provided by

the violator, the Commission determines the violator is able to pay.

When analyzing appropriate sanctions in a particular case, the

Commission typically will direct its staff to examine an entity's

ability to pay disgorgement first; if the entity has the ability to pay

a penalty after paying disgorgement, the Commission will demand an

appropriate penalty amount based on the entity's ability to pay.26

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\25\ See SBREFA Sec. 223(a).

\26\ In accordance with section 21B(d) of the Exchange Act, for

example, the staff considers an entity's ``ability to continue in

business and the collectability of a penalty, taking into account

any other claims of the United States or third parties upon such

person's assets and the amount of such person's assets.''

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Consistent with this practice, paragraph (a)(3) of the Policy makes

penalty-reduction available to small entities that may otherwise be

excluded under paragraph (a)(1). A small entity must demonstrate to the

Commission's satisfaction that it is unable financially to pay a

penalty before the Commission will consider whether penalty-reduction

is warranted. The Policy establishes that the Commission, in its sole

discretion, may consider the eight factors in paragraph (a)(2) of the

Policy as well as reviewing evidence presented by the small entity

requesting penalty-reduction, such as sworn financial statements, to

determine whether reduction is warranted in a particular case. The

small entity must demonstrate to the Commission's satisfaction that it

presently is unable financially to pay the penalty, in whole or in

part, and that it will be unable to pay the penalty, in whole or in

part, over a reasonable period of time.

II. Regulatory Requirements

The Commission is announcing a Penalty Reduction Policy as required

by SBREFA. As a general statement of policy, the Administrative

Procedure Act (``APA'') does not require that the Commission publish

the Policy for notice and comment.27 The Commission wishes,

however, to provide interested parties, particularly small entities, an

opportunity to comment on the Policy. The Commission intends to revisit

the Policy when a reasonable period has passed after the end of the

comment period. In its re-evaluation, the Commission will consider its

experience administering the Policy and comments the Commission

receives.

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\27\ 5 U.S.C. Sec. 553(a)(3)(A).

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List of Subjects in 17 CFR Part 202

Administrative practice and procedure.

Text of Amendment

In accordance with the foregoing, 17 CFR, Chapter II, is amended as

follows:

PART 202--INFORMAL AND OTHER PROCEDURES

1. The authority citation for Part 202 is amended by adding the

following citation to read as follows:

Authority: 15 U.S.C. 77s, 77t, 78d-1, 78u, 78w, 78ll(d), 79r,

79t, 77sss, 77uuu, 80a-37, 80a-41, 80b-9, and 80b-11, unless

otherwise noted.

* * * * *

Section 202.9 is also issued under section 223, 110 Stat. 859 (Mar.

29, 1996).

2. Section 202.9 is added to read as follows:

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

[[Page 16080]]

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.

Dated: March 27, 1997.

By the Commission.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 97-8360 Filed 4-3-97; 8:45 am]

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