Possible Penalties for violating Regulation Systems Compliance and Integrity (Us Securities and Exchange Commission Regulation)
Feel free to email me at editor@exegy.today.
Out of curiosity I figured I would see what Google Gemini stated about what are the penalties for violating RegSCI.
The penalties for violating Regulation SCI (Systems Compliance and Integrity) are significant because the rule governs the critical infrastructure of the U.S. financial markets.1
While the technical "maximum" fine per violation is around $1.2 million, the SEC often aggregates multiple violations to reach settlements in the $1.5 million to $14 million range.
1. The Real-World "Price Tag" (Recent Settlements)
The SEC typically settles these cases for a lump sum that reflects the severity of the system failure or reporting delay.
| Company | Fine Amount | Date | Violation Details |
| ICE (NYSE Parent) | $10 Million | May 2024 | Failure to Notify: The largest recent penalty. ICE failed to "immediately" notify the SEC of a cyber intrusion. Even though the hack was minor ("de minimis"), the 4-day delay in reporting it was the primary violation. |
| NYSE Group | $14 Million | 2018 | Business Continuity: The historic benchmark. Fined for multiple Reg SCI failures, including a botched rollout of a new trading system and failure to follow disaster recovery protocols during a market disruption. |
| Virtu Americas | $1.5 Million | 2019 | Process Failure: Fined for operating an Alternative Trading System (ATS) without proper Reg SCI policies, annual reviews, or quarterly reports. |
2. The Legal Limit (Statutory Maximums for 2025)
Under federal law, the SEC calculates fines using a three-tier system. These limits are per "act or omission," meaning a single system outage could theoretically count as hundreds of separate violations.
Effective January 15, 2025:
Tier 1 (Technical / Administrative):
Max Penalty: $118,225 per violation.
Scenario: Forgetting to file a quarterly report or missing a policy review deadline.
Tier 2 (Fraud / Recklessness):
Max Penalty: $591,127 per violation.
Scenario: Recklessly ignoring a known software bug that later crashes the exchange.
Tier 3 (Substantial Loss / Risk):
Max Penalty: $1,182,253 per violation.
Scenario: A massive system outage that halts trading for millions of investors or causes significant financial loss.
3. Why Fines Exceed the Maximums
You might wonder how a $1.2 million maximum turns into a $14 million fine. The SEC uses aggregation:
Duration: If a system is non-compliant for 10 days, that can be 10 violations.
Scope: If a bad policy affects 5 different subsidiary exchanges (as in the ICE case), that counts as 5 separate infractions.
Counts: Every individual email or report that should have been sent but wasn't is a separate "omission."
4. The #1 Trigger for Fines: Notification Speed
The most common reason for a massive fine today is speed.
The Rule: Reg SCI requires "immediate" notification to the SEC upon confirming a major system event.2
The Trap: Companies often wait to investigate fully before calling the SEC. This is a violation. In the $10M ICE settlement, the SEC penalized them specifically because they took 4 days to assess the impact before picking up the phone.3
Next Step
Are you reviewing this because you need to draft an Incident Response Plan that complies with the "Immediate Notification" standard? (I can outline the specific triggers that require a call to the SEC).
