# Possible Penalties for violating Regulation Systems Compliance and Integrity (Us Securities and Exchange Commission Regulation)

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. |

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### 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.
    

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### 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).