Reed Seeks to Double Statute of Limitations for Securities Law Violations

Press Release

In an effort to strengthen the integrity of our financial marketplace, better protect public investors, and empower the Securities and Exchange Commission (SEC) to investigate and pursue more securities law violators, U.S. Senator Jack Reed (D-RI) has introduced legislation doubling the statute of limitations to seek civil monetary penalties for securities law violations.

This legislation is necessary in light of the Supreme Court's decision in Gabelli v. SEC in which the Court held that the five year clock to take action against wrongdoing starts when the fraud occurs, not when it is discovered. In effect, Gabelli has made the SEC's job of protecting investors even tougher by shortening the amount of time that the SEC has to investigate and pursue securities law violations. Reed's legislation would address these challenges by giving the SEC the breathing room it needs to better police financial markets and protect investors by extending the time period the agency has to seek civil monetary penalties from five years to ten years.

"We cannot allow Wall Street titans to play fast and loose with our securities laws and then run out the clock. Financial fraud has evolved significantly over the years and now often involves multiple parties, complex financial products, and elaborate transactions that are executed in a variety of securities markets, both domestic and foreign. As a result, the evidence of wrongdoing needed to initiate an enforcement action may go undetected for years. 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," said Senator Reed, a senior member of the Senate Banking Committee.

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