---
kind: "section"
citation: "15 U.S.C. § 78u–3"
title: "15"
title_heading: "Commerce and Trade"
number: "78u–3"
heading: "Cease-and-desist proceedings"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/15/78u-3"
units:
  - "Chapter 2B — Securities Exchanges"
---

# §78u–3. Cease-and-desist proceedings

- (a) **Authority of Commission—** If the [Commission](/usc/15/78c.md?p=a-15) finds, after notice and opportunity for hearing, that any [person](/usc/15/78c.md?p=a-9) is violating, has violated, or is about to violate any provision of this chapter, or any rule or regulation thereunder, the [Commission](/usc/15/78c.md?p=a-15) may publish its findings and enter an order requiring such [person](/usc/15/78c.md?p=a-9), and any other [person](/usc/15/78c.md?p=a-9) that is, was, or would be a cause of the violation, due to an act or omission the [person](/usc/15/78c.md?p=a-9) knew or should have known would contribute to such violation, to cease and desist from committing or causing such violation and any future violation of the same provision, rule, or regulation. Such order may, in addition to requiring a [person](/usc/15/78c.md?p=a-9) to cease and desist from committing or causing a violation, require such [person](/usc/15/78c.md?p=a-9) to comply, or to take steps to effect compliance, with such provision, rule, or regulation, upon such terms and conditions and within such time as the [Commission](/usc/15/78c.md?p=a-15) may specify in such order. Any such order may, as the [Commission](/usc/15/78c.md?p=a-15) deems appropriate, require future compliance or steps to effect future compliance, either permanently or for such period of time as the [Commission](/usc/15/78c.md?p=a-15) may specify, with such provision, rule, or regulation with respect to any [security](/usc/15/78c.md?p=a-10), any [issuer](/usc/15/78c.md?p=a-8), or any other [person](/usc/15/78c.md?p=a-9).
- (b) **Hearing—** The notice instituting proceedings pursuant to [subsection (a)](#a) shall fix a hearing date not earlier than 30 days nor later than 60 days after service of the notice unless an earlier or a later date is set by the [Commission](/usc/15/78c.md?p=a-15) with the consent of any respondent so served.
- (c) **Temporary order—**
  - (1) **In general—** Whenever the [Commission](/usc/15/78c.md?p=a-15) determines that the alleged violation or threatened violation specified in the notice instituting proceedings pursuant to [subsection (a)](#a), or the continuation thereof, is likely to result in significant dissipation or conversion of assets, significant harm to investors, or substantial harm to the public interest, including, but not limited to, losses to the [Securities](/usc/15/78c.md?p=a-10) Investor Protection Corporation, prior to the completion of the proceedings, the [Commission](/usc/15/78c.md?p=a-15) may enter a temporary order requiring the respondent to cease and desist from the violation or threatened violation and to take such action to prevent the violation or threatened violation and to prevent dissipation or conversion of assets, significant harm to investors, or substantial harm to the public interest as the [Commission](/usc/15/78c.md?p=a-15) deems appropriate pending completion of such proceedings. Such an order shall be entered only after notice and opportunity for a hearing, unless the [Commission](/usc/15/78c.md?p=a-15) determines that notice and hearing prior to entry would be impracticable or contrary to the public interest. A temporary order shall become effective upon service upon the respondent and, unless set aside, limited, or suspended by the [Commission](/usc/15/78c.md?p=a-15) or a court of competent jurisdiction, shall remain effective and enforceable pending the completion of the proceedings.
  - (2) **Applicability—** [Paragraph (1)](#c-1) shall apply only to a respondent that acts, or, at the time of the alleged misconduct acted, as a [broker](/usc/15/78c.md?p=a-4-A), [dealer](/usc/15/78c.md?p=a-5-A), [investment adviser](/usc/15/78c.md?p=a-20), [investment company](/usc/15/78c.md?p=a-12-A-iii), [municipal securities dealer](/usc/15/78c.md?p=a-30), [government securities broker](/usc/15/78c.md?p=a-43), [government securities dealer](/usc/15/78c.md?p=a-44), [registered public accounting firm](/usc/15/78c.md?p=a-59) (as defined in [section 7201 of this title](/usc/15/7201.md)), or [transfer agent](/usc/15/78c.md?p=a-25), or is, or was at the time of the alleged misconduct, an associated [person](/usc/15/78c.md?p=a-9) of, or a [person](/usc/15/78c.md?p=a-9) seeking to become associated with, any of the foregoing.
  - (3) **Temporary freeze—**
    - (A) **In general—**
      - (i) **Issuance of temporary order—** Whenever, during the course of a lawful investigation involving possible violations of the Federal [securities laws](/usc/15/78c.md?p=a-47) by an [issuer](/usc/15/78c.md?p=a-8) of publicly traded [securities](/usc/15/78c.md?p=a-10) or any of its [directors](/usc/15/78c.md?p=a-7), officers, partners, controlling [persons](/usc/15/78c.md?p=a-9), agents, or employees, it shall appear to the [Commission](/usc/15/78c.md?p=a-15) that it is likely that the [issuer](/usc/15/78c.md?p=a-8) will make extraordinary payments (whether compensation or otherwise) to any of the foregoing [persons](/usc/15/78c.md?p=a-9), the [Commission](/usc/15/78c.md?p=a-15) may petition a Federal district court for a temporary order requiring the [issuer](/usc/15/78c.md?p=a-8) to escrow, subject to court supervision, those payments in an interest-bearing account for 45 days.
      - (ii) **Standard—** A temporary order shall be entered under [clause (i)](#c-3-A-i), only after notice and opportunity for a hearing, unless the court determines that notice and hearing prior to entry of the order would be impracticable or contrary to the public interest.
      - (iii) **Effective period—** A temporary order issued under [clause (i)](#c-3-A-i) shall—
        - (I) become effective immediately;
        - (II) be served upon the parties subject to it; and
        - (III) unless set aside, limited or suspended by a court of competent jurisdiction, shall remain effective and enforceable for 45 days.
      - (iv) **Extensions authorized—** The effective period of an order under this subparagraph may be extended by the court upon good cause shown for not longer than 45 additional days, provided that the combined period of the order shall not exceed 90 days.
    - (B) **Process on determination of violations—**
      - (i) **Violations charged—** If the [issuer](/usc/15/78c.md?p=a-8) or other [person](/usc/15/78c.md?p=a-9) described in [subparagraph (A)](#c-3-A) is charged with any violation of the Federal [securities laws](/usc/15/78c.md?p=a-47) before the expiration of the effective period of a temporary order under [subparagraph (A)](#c-3-A) (including any applicable extension period), the order shall remain in effect, subject to court approval, until the conclusion of any legal proceedings related thereto, and the affected [issuer](/usc/15/78c.md?p=a-8) or other [person](/usc/15/78c.md?p=a-9), shall have the right to petition the court for review of the order.
      - (ii) **Violations not charged—** If the [issuer](/usc/15/78c.md?p=a-8) or other [person](/usc/15/78c.md?p=a-9) described in [subparagraph (A)](#c-3-A) is not charged with any violation of the Federal [securities laws](/usc/15/78c.md?p=a-47) before the expiration of the effective period of a temporary order under [subparagraph (A)](#c-3-A) (including any applicable extension period), the escrow shall terminate at the expiration of the 45-day effective period (or the expiration of any extension period, as applicable), and the disputed payments (with accrued interest) shall be returned to the [issuer](/usc/15/78c.md?p=a-8) or other affected [person](/usc/15/78c.md?p=a-9).
- (d) **Review of temporary orders—**
  - (1) **Commission review—** At any time after the respondent has been served with a temporary cease-and-desist order pursuant to [subsection (c)](#c), the respondent may apply to the [Commission](/usc/15/78c.md?p=a-15) to have the order set aside, limited, or suspended. If the respondent has been served with a temporary cease-and-desist order entered without a prior [Commission](/usc/15/78c.md?p=a-15) hearing, the respondent may, within 10 days after the date on which the order was served, request a hearing on such application and the [Commission](/usc/15/78c.md?p=a-15) shall hold a hearing and render a decision on such application at the earliest possible time.
  - (2) **Judicial review—** Within—
    - (A) 10 days after the date the respondent was served with a temporary cease-and-desist order entered with a prior [Commission](/usc/15/78c.md?p=a-15) hearing, or
    - (B) 10 days after the [Commission](/usc/15/78c.md?p=a-15) renders a decision on an application and hearing under [paragraph (1)](#d-1), with respect to any temporary cease-and-desist order entered without a prior [Commission](/usc/15/78c.md?p=a-15) hearing,

    the respondent may apply to the United States district court for the district in which the respondent resides or has its principal place of business, or for the District of Columbia, for an order setting aside, limiting, or suspending the effectiveness or enforcement of the order, and the court shall have jurisdiction to enter such an order. A respondent served with a temporary cease-and-desist order entered without a prior [Commission](/usc/15/78c.md?p=a-15) hearing may not apply to the court except after hearing and decision by the [Commission](/usc/15/78c.md?p=a-15) on the respondent’s application under paragraph (1) of this subsection.

  - (3) **No automatic stay of temporary order—** The commencement of proceedings under paragraph (2) of this subsection shall not, unless specifically ordered by the court, operate as a stay of the [Commission](/usc/15/78c.md?p=a-15)’s order.
  - (4) **Exclusive review—** [Section 78y of this title](/usc/15/78y.md) shall not apply to a temporary order entered pursuant to this section.
- (e) **Authority to enter order requiring accounting and disgorgement—** In any cease-and-desist proceeding under [subsection (a)](#a), the [Commission](/usc/15/78c.md?p=a-15) may enter an order requiring accounting and dis­gorgement, including reasonable interest. The [Commission](/usc/15/78c.md?p=a-15) is authorized to adopt rules, regulations, and orders concerning payments to investors, rates of interest, periods of accrual, and such other matters as it deems appropriate to implement this subsection.
- (f) **Authority of the Commission to prohibit persons from serving as officers or directors—** In any cease-and-desist proceeding under [subsection (a)](#a), the [Commission](/usc/15/78c.md?p=a-15) may issue an order to prohibit, conditionally or unconditionally, and permanently or for such period of time as it shall determine, any [person](/usc/15/78c.md?p=a-9) who has violated [section 78j(b) of this title](/usc/15/78j.md?p=b) or the rules or regulations thereunder, from acting as an officer or [director](/usc/15/78c.md?p=a-7) of any [issuer](/usc/15/78c.md?p=a-8) that has a class of [securities](/usc/15/78c.md?p=a-10) registered pursuant to [section 78l](/usc/15/78l.md) of this title, or that is required to file reports pursuant to [section 78o(d)](/usc/15/78o.md?p=d) of this title, if the conduct of that [person](/usc/15/78c.md?p=a-9) demonstrates unfitness to serve as an officer or [director](/usc/15/78c.md?p=a-7) of any such [issuer](/usc/15/78c.md?p=a-8).

## Source credit

(June 6, 1934, ch. 404, title I, § 21C, as added Pub. L. 101–429, title II, § 203, Oct. 15, 1990, 104 Stat. 939; amended Pub. L. 107–204, § 3(b)(3), title XI, §§ 1103, 1105(a), July 30, 2002, 116 Stat. 749, 807, 809; Pub. L. 111–203, title IX, § 985(b)(8), July 21, 2010, 124 Stat. 1934.)

## Notes

### Editorial Notes

### References in Text

This chapter, referred to in subsec. (a), was in the original “this title”. See References in Text note set out under section 78a of this title.

Section 7201 of this title, referred to in subsec. (c)(2), was in the original “section 2 of the Sarbanes-Oxley Act of 2002”, Pub. L. 107–204, which enacted section 7201 of this title and amended section 78c of this title.

### Amendments

2010—Subsec. (c)(2). Pub. L. 111–203 substituted “Paragraph (1)” for “paragraph (1) subsection”.

2002—Subsec. (c)(2). Pub. L. 107–204, § 1103(b), substituted “paragraph (1)” for “This”.

Pub. L. 107–204, § 3(b)(3), inserted “registered public accounting firm (as defined in section 7201 of this title),” after “government securities dealer,”.

Subsec. (c)(3). Pub. L. 107–204, § 1103(a), added par. (3).

Subsec. (f). Pub. L. 107–204, § 1105(a), added subsec. (f).

### Statutory Notes and Related Subsidiaries

### Effective Date of 2010 Amendment

Amendment by Pub. L. 111–203 effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as an Effective Date note under section 5301 of Title 12, Banks and Banking.

### Effective Date

Section effective Oct. 15, 1990, with provisions relating to civil penalties and accounting and disgorgement, see section 1(c)(1), (2) of Pub. L. 101–429, set out in an Effective Date of 1990 Amendment note under section 77g of this title.