New Bill Would Arm SEC with More Power to Return Money to Defrauded Investors

WASHINGTON – A bill that would strengthen the Securities and Exchange Commission’s enforcement powers and increase its ability to return funds to defrauded investors was recently introduced by House Financial Services Committee Chairman Michael G. Oxley (R-Ohio) and Capital Markets Subcommittee Chairman Richard H. Baker (R-La.) “There are two purposes here,” Oxley said at a May 21 news conference. “The first is to actually return money to harmed investors and make them whole to the greatest extent possible. The second is to strengthen the SEC to make it even more effective in deterring securities fraud and enforcing securities statutes.” Oxley added that the proposed Securities Fraud Deterrence and Investor Restitution Act “will not only acts as a deterrent, but even more importantly will help to restore some faith in the process for investors who have plenty of education in the school of hard knocks.” The bill includes provisions that will prevent violators of securities laws from shielding property from the SEC and give the regulator additional authority to impose civil money penalties. Other provisions include: * obtaining necessary bank records in securities investigations; * substantially increasing maximum fines for certain securities fraud; * contracting with private attorneys who have specialized collection expertise to conserve SEC resources and increase the amount of funds recovered; * giving the states a mechanism whereby they can return recovered money to injured investors; * allowing undistributed portions of disgorgement funds to be used for investor education efforts; * encouraging private parties to provide the SEC with documents helpful to investigations; * authorizing criminal prosecutors to release limited grand jury information to SEC staff; * improving the SEC’s authority to serve subpoenas nationwide. Oxley and Baker estimate that defrauded investors might get back 50% to 70% of losses if the bill becomes law. SEC fines would also increase significantly under the bill, raising the maximum fine for a single violation to as much as $2 million, up from $600,000 currently. “If you’re the victim of a crime, you might get some satisfaction out of knowing that the car thief has been caught and thrown in the slammer and that your stolen property has been recovered,” Baker said. “But to watch the sheriff and a bunch of lawyers, after the trial, pile into your car and drive away with it just isn’t justice and isn’t an outcome you’re likely to consider fair.” Baker emphasized “that the system should be changed to create the opportunity for real justice,” adding “that to truly restore investor confidence, fairness is the key.” -