Civil Money Penalty (CMP)

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Definition: Civil Money Penalty (CMP)

When a civil court inflicts a penalty or a punitive fine on an individual or entity that is engaged in illegal or unethical practices, it is known as a civil money penalty or CMP. Although Civil money penalties, are commonly seen in security market/securities law violations, it can be liable to be imposed on a variety of laws and regulations violations by individuals or organizations. At times, the CMP serves not just as a purpose for punitive action, but it also serves as a deterrent to potential violators. CMP is commonly imposed due to violations of securities law and regulations.

CMP or Civil Money Penalty serves as a deterrent for future violations of:

• pertinent laws or regulations

• orders issued by the regulatory body/court

• written agreements between an entity or institution and a federal agency

The Civil Money Penalty fine can be assessed not just by civil courts, but also from regulatory bodies in the USA, such as the SEC and the FDIC (Federal Deposit Insurance Corporation).

Hence the practice of giving out civil money penalties (CMP) acts as a deterrent in penalizing violators who gain from illegal or unethical activities/practices. It is generally observed that as a norm, the penalty or fine imposed is equivalent in value to the illicit gains from violating activity.

For instance, the Securities and Exchange Commission (SEC), securities market regulator in the US, has the power to impose civil money penalties (CMP) on infringers that are equivalent in value to the gains made from deemed illegal or unethical capital market activity. Likewise, as an other example. stockbrokers engaged in circular trading would be liable to be punitively fined a civil money penalty (CMP) up to the extent of the profit incurred by the stockbroker. Fines seeking to compensate for insider trading from brokers is yet another example.



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