MORE TIME TO PURSUE CIVIL PENALTIESBy
Senator Jack Reed (D.-R.I.), a senior member of the U.S. Senate Committee on Banking, Housing, and Urban Affairs, introduced a bill that would double the statute of limitations for securities law violations, making it easier to sue companies for civil monetary penalties.
The bill, which initially had support from only Democrats, is a response to the outcome of Gabelli v. SEC, where the Supreme Court ruled that regulators have five years from the time the fraud occurs—not when it’s discovered—to take legal action. That decision made it harder for the Securities & Exchange Commission (SEC) to pursue wrongdoings such as accounting fraud. The bill would align the SEC’s statute of limitations with the 10-year period of limitations under the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA). Reed said, “This legislation gives the SEC more time to unearth wrongdoing in the financial marketplace, and sends a clear signal that securities law violators are going to need more than a stopwatch if they intend to break the law.”