The SEC Totally Cares about Its Injunctions
Last week I wrote a post discussing the injunctions the SEC typically obtains against defendants in federal court. I noted the oddity of these obey-the-law injunctions and wondered aloud why the Commission never pursues findings of contempt when those defendants disobey the very provisions they were ordered never to disobey again.
In a comment to the post, Robert Knuts noted “[t]wo simple reasons. 1. A permanent injunction triggers potential collateral consequences under various provisions of the Federal securities laws. 2. If such a recidivist went to trial, the violation of the prior injunction would likely lead to maximum civil penalties.”
These are both probably true. The first certainly is. Especially for large financial institutions, limiting and avoiding the collateral consequences of SEC injunctions and other regulatory sanctions can be almost its own practice area. I had meant to mention this in the original post and forgot in the late night fog of composition. As for the second, I don’t have supporting data, but violation of prior injunctions certainly wouldn’t be helpful to a defendant in a second go-round with the SEC in federal court. So the original injunction would have value to the Commission in that respect.
But one thing that should be mentioned: this isn’t the only way a federal agency might handle the injunctions it seeks. The Federal Trade Commission, for one, routinely pursues and wins civil contempt orders against defendants who have violated injunctions issued by federal courts. Those injunctions, though, do not merely order defendants to obey specific provisions of the law. They order defendants not to do specific things, such as “using infomercials to sell any product, service, or program.” When the people subject to those orders go off-track, occasionally the FTC steps in and asks a court to hold them in contempt for doing so.
If anyone knows the history of how these two agencies’ practices regarding injunctions developed, I’d be happy to hear that.