# SEC's Uyeda Urges Review of 20-Year-Old Corporate Penalty Framework

By Riza Dagoc

Canonical URL: https://www.tokenpost.com/news/regulation/47040
Published: 2026-11-02T23:31:17.000Z
Updated: 2026-11-02T23:31:17.000Z
Section: Regulation

> He raised concerns about shareholder turnover and Fair Funds distributions, including when injured investors still own stock in a company paying a penalty.

SEC Commissioner Mark T. Uyeda urged the agency to reassess its corporate penalty framework, saying shareholder turnover and penalty distributions can complicate who ultimately bears the cost of a fine.

Uyeda spoke Monday, Nov. 2, at 9:10 a.m. ET (14:10 UTC) in New York at the Practicing Law Institute's 58th Annual Institute on Securities Regulation. The SEC issued its corporate penalty statement unanimously on Jan. 4, 2006. Uyeda described it as a guide to agency judgment: “It is a framework for judgment, not a rule of abstention.”

The framework weighs whether a company benefited directly from a securities law violation and whether a penalty would compensate injured shareholders or cause them further harm. Seven additional factors are deterrence, injury to innocent parties, whether complicity was widespread throughout the corporation, the perpetrators' intent, how difficult the violation was to detect, remediation and cooperation with the SEC and other law enforcement. The framework addresses the possibility that a corporate penalty could burden shareholders harmed by the underlying misconduct even as penalties serve as a deterrent.

Uyeda pointed to the time that can pass between a company's corrective disclosure and a final SEC enforcement recommendation. Shareholders may change during that interval, leaving a later penalty to affect a different group of investors. He also raised questions about Fair Funds distributions when injured investors still hold shares in the company paying the penalty.

Congress expanded the SEC's authority to seek civil money penalties in 1990 through the Securities Enforcement Remedies and Penny Stock Reform Act. Section 308 of the Sarbanes-Oxley Act of 2002 allowed the SEC to direct penalty funds to investors harmed by securities violations through its Fair Funds program. Distributions are reduced by administrative costs.

Uyeda said he directed SEC staff to follow the framework when he became acting chairman on Jan. 20, 2025. Staff guidance dated Feb. 24, 2026, directs staff evaluating company cooperation and possible civil penalties to consider the 2006 statement alongside the Seaboard Report. It allows for zero-penalty settlements and leaves the Commission discretion to assess each case individually.