CCT Enforcement and Penalties 3 — Questions and Answers
Question 1: Under the Sarbanes-Oxley Act Section 302, what is the maximum criminal penalty for a CEO or CFO who knowingly certifies a false financial report?
- $1 million and 10 years imprisonment
- $5 million and 20 years imprisonment (Correct answer)
- $10 million and 30 years imprisonment
- $500,000 and 5 years imprisonment
Correct answer: $5 million and 20 years imprisonment
SOX Section 906 provides for criminal penalties of up to $5 million and 20 years imprisonment for willful false certifications of financial statements.
Question 2: What term describes the penalty structure where the severity of a fine increases based on the number of prior violations within a rolling time period?
- Progressive penalty scheme
- Tiered enforcement
- Recidivist multiplier (Correct answer)
- Escalating sanctions
Correct answer: Recidivist multiplier
A recidivist multiplier increases penalties when a company has prior violations, reflecting that repeat offenders warrant greater deterrence.
Question 3: The SEC's Whistleblower Program under Dodd-Frank requires that awards be paid only when the whistleblower's information leads to a successful enforcement action resulting in sanctions exceeding what threshold?
- $100,000
- $500,000
- $1 million (Correct answer)
- $5 million
Correct answer: $1 million
SEC whistleblower awards are available only when the related enforcement action results in monetary sanctions exceeding $1 million.
Question 4: Under the Bank Secrecy Act, what is the maximum civil money penalty per willful violation for failing to file a required Currency Transaction Report (CTR)?
- $10,000
- $25,000
- $100,000
- $1,000,000 (Correct answer)
Correct answer: $1,000,000
Willful BSA violations, including failure to file CTRs, can result in civil penalties up to $1,000,000 per violation.
Question 5: What is a 'cease and desist order' in the context of regulatory enforcement?
- A criminal indictment requiring immediate arrest
- A formal regulatory directive requiring a company to stop a specific unlawful activity (Correct answer)
- A court order freezing all company assets
- A private letter warning without legal force
Correct answer: A formal regulatory directive requiring a company to stop a specific unlawful activity
A cease and desist order is an official regulatory command requiring the recipient to stop specified illegal or improper conduct.
Question 6: Which principle guides sentencing courts to consider a company's compliance program when determining penalties under the U.S. Federal Sentencing Guidelines?
- The proportionality principle
- The culpability score adjustment (Correct answer)
- The de minimis exception
- The corporate veil test
Correct answer: The culpability score adjustment
The Federal Sentencing Guidelines use a culpability score that can be reduced if the organization had an effective compliance program in place at the time of the offense.
Question 7: A company enters into a Non-Prosecution Agreement (NPA) with the DOJ. What key obligation typically distinguishes an NPA from a Deferred Prosecution Agreement (DPA)?
- No charges are filed under an NPA, whereas charges are filed but deferred under a DPA (Correct answer)
- An NPA requires a guilty plea; a DPA does not
- An NPA is supervised by a court; a DPA is not
- An NPA imposes no compliance obligations; a DPA does
Correct answer: No charges are filed under an NPA, whereas charges are filed but deferred under a DPA
Under an NPA, no charges are filed at all as long as the company fulfills its obligations, while a DPA involves charges that are suspended pending compliance.
CCT Enforcement and Penalties 3
Under the Sarbanes-Oxley Act Section 302, what is the maximum criminal penalty for a CEO or CFO who knowingly certifies a false financial report?