Statements on Introduced Bills and Joint Resolutions

Floor Speech

BREAK IN TRANSCRIPT

By Mr. REED (for himself, Mr. LEVIN, Mr. MARKEY, Mrs. SHAHEEN, and Ms. WARREN):

S. 2868. A bill to establish a statute of limitations for certain actions of the Securities and Exchange Commission, and for other purposes; to the Committee on Banking, Housing, and Urban Affairs.

Mr. REED. Mr. President, today I am introducing legislation that extends the time period the Securities and Exchange Commission, SEC, would have 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 5 year clock to take action aginst 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.

Financial fraud has evolved significantly over the years and now 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, many of the critical facts necessary to initiate an action may go undetected for years. Securities law violators may simply run out the clock, now with greater ease in the aftermath of Gabelli.

Couple this with the fact that while we have given the SEC even greater responsibilities, Congress, despite my ongoing efforts to urge otherwise, has not provided the agency with all the resources necessary to carry out its duties. SEC Chair White recently testified before the Banking Committee that ``if the SEC does not receive sufficient additional resources, the agency will be unable to fully build out its technology and hire the industry experts and other staff needed to oversee and police our areas of responsibility, especially in light of the expanding size and complexity of our overall regulatory space.''

To give just one example of the impact of this resource shortfall, Chair White also testified that ``in 2004, the SEC had 19 examiners per trillion dollars in investment adviser assets under management. Today, we have only 8.''

This legislation would address these challenges by giving the SEC the breathing room it needs to better police our markets and protect investors. Specifically, this bill extends the time period the SEC has to seek civil monetary penalties from five years to ten years, thereby strengthening the integrity of our markets, better protecting public investors, and empowering the SEC to investigate and pursue more securities law violators, particularly those most sophisticated at evading detection.

In so doing, the bill would align the SEC's statute of limitations with the limitations period applicable to complex civil financial fraud actions initiated pursuant to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, FIRREA. For over 2 decades, the Department of Justice has benefited from FIRREA, which allows the DOJ to seek civil penalties within a 10-year time period against persons who have committed fraud against financial institutions. The SEC, which pursues similarly complex financial fraud cases, should have the same time necessary to bring wrongdoers that violate the securities laws to justice.

I urge my colleagues to join me in supporting this legislation.

BREAK IN TRANSCRIPT