[Congressional Record Volume 161, Number 126 (Wednesday, August 5, 2015)]
[Senate]
[Page S6386]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED (for himself and Mrs. Shaheen):
  S. 1960. 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 reintroducing 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 continues to be 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. Unfortunately, Gabelli has made it 
more difficult for the SEC to protect investors by shortening the 
amount of time that the SEC has to investigate and pursue securities 
law violations.
  Financial fraud has evolved considerably over the years and now often 
consists of 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 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 reality 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.
  To give an example of the impact of this resource shortfall, SEC 
Chair White on May 5, 2015, before the Senate Financial Services and 
General Government Appropriations Subcommittee testified that ``even 
with the SEC's efficient use of limited resources to improve its risk 
assessment capabilities and focus its examination staff on areas posing 
the greatest risk to investors--efforts that helped to increase the 
number of investment adviser examinations approximately 20 percent from 
fiscal year 2013--the SEC was only able to examine 10 percent of 
registered investment advisers in fiscal year 2014. A rate of adviser 
examination coverage at that level presents a high risk to the 
investing public.''
  This legislation would address some of these challenges by giving the 
SEC the breathing room it needs to better protect our markets and 
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 
investors, and empowering the SEC to investigate and pursue more 
securities law violators, particularly those most sophisticated at 
evading detection.
  In addition, 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 more than 20 years, 
the Department of Justice, DOJ, 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 thank Public Citizen, U.S. PIRG, Consumer Action, the Consumer 
Federation of America, and Americans for Financial Reform for their 
support, and I urge my colleagues to join Senator Shaheen and me in 
supporting this legislation.
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