Senator Jack Reed (D. RI), who sits on the Senate Banking Committee, has been working on legislation to that would double from five to 10 years the amount of time that federal securities regulators have to seek penalties in complex cases by:
http://www.reuters.com/...
Rhode Island Senator Jack Reed, a high-ranking member of the Senate Banking Committee, has been working with officials at the U.S. Securities and Exchange Commission and expects to introduce the measure some time this fall, his staffer confirmed.
The draft bill would extend the statute of limitations for the SEC and give it more flexibility as it tries to turbocharge its enforcement division. It is still haunted by its failure to catch the Bernard Madoff and Allen Stanford Ponzi schemes and has been criticized for a lack of marquee financial-crisis cases against Wall Street executives.
President Barack Obama earlier this year brought in former federal prosecutor Mary Jo White to head the agency, and in recent months it has charged hedge fund tycoon Steven A. Cohen and stepped up actions against municipal fraud, among other big cases.
"Securities cases can be exceedingly complex," Senator Reed said in a statement provided exclusively to Reuters.
"If the SEC has a strong case that would serve to protect investors and those who do business appropriately, it would be a shame if a short statute of limitations were the reason for a case not being brought."
It is not clear if such legislation would help the SEC bring cases tied to the 2007-2009 financial crisis. Case law is not definitive about whether such a change would apply to violations that occurred before the legislation is signed but had still not hit the original five-year statute of limitations. - Retuers, 8/14/13
Reed has been working on similar legislation for some time now:
http://www.housingwire.com/...
Sens. Jack Reed, D-R.I., and Chuck Grassly, R-Iowa, submitted the Stronger Enforcement of Civil Penalties Act Monday. Existing law caps penalties to $150,000 per violation for individuals and $725,000 for entire institutions.
The SEC can tie penalties to what the firm profited from the fraud, but only if the case reaches federal court. The underfunded agency more often settles cases administratively.
The bill would cap for violations based on their seriousness. For the worst offenses, individuals could be fined up to $1 million. Firms could be penalized $10 million per violation. The SEC can triple the penalty in cases where it ties the fine to what the institution profited from the fraud. The agency would also be able to triple the fine for those convicted of a previous securities law violation in the past five years.
In previous legislative hearings, federal regulators warned against any requirement to get an admission of guilt from violators. SEC Chairwoman Mary Schapiro wrote to the Senate asking for an expansion of penalty limits instead.
"If a fine is just decimal dust for a Wall Street firm, that's not a deterrent," Grassley said in a statement. "It's just the cost of doing business." - Housing Wire, 7/23/12
Here's a little background info that might have inspired Reed to come up with such legislation:
http://www.moneynews.com/...
The U.S. Supreme Court on Wednesday limited the authority of the Securities and Exchange Commission to seek civil penalties over conduct that occurred more than five years before investigators took action.
The nine-member court ruled by a unanimous vote that the five-year clock for the government to act on fraud begins to tick when the fraud occurs, not when it is discovered.
Wednesday's decision is a defeat for securities regulators, who would have benefited from a favorable ruling because it could have bought them more time to bring complex cases, including cases springing from the 2007-2009 financial crisis.
The decision has implications beyond the SEC because the five-year statute of limitations applies to civil actions by numerous government agencies, from the Federal Trade Commission to the Social Security Administration.
At the same time, though, the SEC and other agencies can still ask defendants for voluntary suspensions of the statute of limitations, which defendants often grant in hopes of leniency.
Also, the restriction applies to monetary penalties, not to the SEC's ability to recovery of ill-gotten gains and injunctions.
The case marks a victory for mutual fund manager Marc Gabelli and colleague Bruce Alpert, whom the SEC claimed allowed a firm now known as Headstart Advisers Ltd to conduct hundreds of "market-timing" trades. Such trades involve rapid trading to exploit market or price inefficiencies.
The practice, while not illegal, is considered improper. The SEC alleged they engaged in market-timing trades without properly disclosing it to board directors and other investors. - Money News, 2/27/13
I'll be interested to see what the final legislation looks like. In other SEC-related news, Senator Reed now has a familiar face working for the SEC:
http://www.complianceweek.com/...
On Friday, Kara Stein was officially sworn in as the newest commissioner at the Securities and Exchange Commission, replacing former Commissioner Elisse Walter.
President Barack Obama nominated Stein to the SEC on May 23 and her nomination was confirmed by the U.S. Senate on Aug. 1, along with that of Dr. Michael Piwowar, who is expected to be sworn into office as an SEC Commissioner this week to replacing the outgoing Troy Parades.
Stein previously was legal counsel and senior policy Adviser to Sen. Jack Reed, a Democrat from Rhode Island. From 2009 to 2013, she was staff director of the Senate Banking, Housing, and Urban Affairs Committee's Subcommittee on Securities, Insurance, and Investment.
Before working on Capitol Hill, Stein was an associate at the law firm of Wilmer, Cutler & Pickering and an assistant professor with the University of Dayton School of Law. She was an Advocacy Fellow with the Georgetown University Law Center from 1993 to 1995, and was a visiting lecturer with the University of Nigeria Faculty of Law from 1989 to 1990. She earned degrees from Yale College and Yale Law School. - Compliance Week, 8/12/13
If you would like more information, please contact Senator Reed's office:
http://www.reed.senate.gov/...