[Congressional Record (Bound Edition), Volume 155 (2009), Part 15]
[House]
[Pages 19676-19677]
[From the U.S. Government Publishing Office, www.gpo.gov]




             CLARIFYING SEC'S AUTHORITY TO SANCTION BROKERS

  Mr. FRANK of Massachusetts. Mr. Speaker, I move to suspend the rules 
and pass the bill (H.R. 2623) to amend the Federal securities laws to 
clarify and expand the definition of certain persons under those laws.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 2623

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. FORMERLY ASSOCIATED PERSONS.

       (a) Member or Employee of the Municipal Securities 
     Rulemaking Board.--Section 15B(c)(8) of the Securities 
     Exchange Act of 1934 (15 U.S.C. 78o-4(c)(8)) is amended by 
     striking ``any member or employee'' and inserting ``any 
     person who is, or at the time of the alleged misconduct was, 
     a member or employee''.
       (b) Person Associated With a Government Securities Broker 
     or Dealer.--Section 15C of the Securities Exchange Act of 
     1934 (15 U.S.C. 78o-5) is amended--
       (1) in subsection (c)(1)(C), by striking ``or seeking to 
     become associated,'' and inserting ``seeking to become 
     associated, or, at the time of the alleged misconduct, 
     associated or seeking to become associated'';
       (2) in subsection (c)(2)(A), by inserting ``, seeking to 
     become associated, or, at the time of the alleged misconduct, 
     associated or seeking to become associated'' after ``any 
     person associated''; and
       (3) in subsection (c)(2)(B), by inserting ``, seeking to 
     become associated, or, at the time of the alleged misconduct, 
     associated or seeking to become associated'' after ``any 
     person associated''.
       (c) Person Associated With a Member of a National 
     Securities Exchange or Registered Securities Association.--
     Section 21(a)(1) of the Securities Exchange Act of 1934 (15 
     U.S.C. 78u(a)(1)) is amended by inserting ``, or, as to any 
     act or practice, or omission to act, while associated with a 
     member, formerly associated'' after ``member or a person 
     associated''.
       (d) Participant of a Registered Clearing Agency.--Section 
     21(a)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 
     78u(a)(1)) is amended by inserting ``or, as to any act or 
     practice, or omission to act, while a participant, was a 
     participant,'' after ``in which such person is a 
     participant,''.
       (e) Officer or Director of a Self-Regulatory 
     Organization.--Section 19(h)(4) of the Securities Exchange 
     Act of 1934 (15 U.S.C. 78s(h)(4)) is amended--
       (1) by striking ``any officer or director'' and inserting 
     ``any person who is, or at the time of the alleged misconduct 
     was, an officer or director''; and
       (2) by striking ``such officer or director'' and inserting 
     ``such person''.
       (f) Officer or Director of an Investment Company.--Section 
     36(a) of the Investment Company Act of 1940 (15 U.S.C. 80a-
     35(a)) is amended--
       (1) by striking ``a person serving or acting'' and 
     inserting ``a person who is, or at the time of the alleged 
     misconduct was, serving or acting''; and
       (2) by striking ``such person so serves or acts'' and 
     inserting ``such person so serves or acts, or at the time of 
     the alleged misconduct, so served or acted''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Massachusetts (Mr. Frank) and the gentleman from California (Mr. 
McCarthy) each will control 20 minutes.
  The Chair recognizes the gentleman from Massachusetts.
  Mr. FRANK of Massachusetts. Mr. Speaker, this is another important 
bipartisan bill. The gentleman from California (Mr. McCarthy) took the 
initiative here, and we were pleased to work with him.
  The Chair of the subcommittee, the gentleman from Pennsylvania (Mr. 
Kanjorski), is dealing with a back problem, so he's not here. But he's 
not dealing with a backbone problem, because this bill puts some more 
backbone into the antifraud laws. And what it does is, in consultation 
with the SEC, enhances their ability to kick people, in effect, out of 
the industry who have a bad record. And it makes it very clear that a 
past bad record or a past affiliation would still be relevant in giving 
the SEC the right to protect investors.
  We are all aware that too little has been done to protect investors. 
This is a step forward towards further empowering the SEC to do the job 
of protecting investors.
  Mr. Speaker, I reserve the balance of my time.
  Mr. McCARTHY of California. Mr. Speaker, I yield myself such time as 
I may consume.
  Mr. Speaker, I rise in support of H.R. 2623, legislation that would 
amend the Federal securities laws to clarify the Security and Exchange 
Commission's, the SEC, authority to sanction certain employees of 
regulated or supervised entities after they leave their jobs.
  I would like to thank Mr. Kanjorski and Chairman Frank for bringing 
this bill to the floor today. I would also like to mention that this 
legislation was included in a larger piece of securities legislation 
from the 110th Congress, H.R. 6513, the Securities Act of 2008, which 
passed the House on suspension by voice vote.
  The legislation is also included in H.R. 3310, the Consumer 
Protection and Regulatory Enhancement Act introduced by Ranking Member 
Bachus, and I appreciate his support on this legislation.
  This legislation is directed at ensuring that former employees of 
organizations like the New York Stock Exchange or the Financial 
Industry Regulatory Authority can be held accountable for any 
misconduct while an employee of these organizations.
  Many provisions of Federal securities law which authorize the 
sanctioning of a person who engages in misconduct while associated with 
a regulated or supervised entity explicitly provide that such authority 
exists even if the person is no longer associated with that entity or 
has left his or her job. But there are confusing loopholes so that 
employees of some regulated or supervised organizations cannot be 
sanctioned by the SEC after they leave their positions. By clarifying 
the SEC's

[[Page 19677]]

authority to sanction formerly associated persons, we ensure that 
employees are held accountable for their actions while in those 
positions even if they have moved on to another job.
  Specifically, my legislation amends the Securities Exchange Act of 
1994 and the Investment Company Act of 1940. Congress must ensure that 
the SEC has authority to investigate individuals suspected of violating 
the securities laws, to bring enforcement cases, and have those cases 
considered on the merits and not be dismissed on an ambiguity because a 
statute is confusing. No one should be able to violate the securities 
laws and resign their position knowing that the SEC cannot proceed 
against them. My legislation does not expand or alter the SEC's current 
authority; it clarifies it.
  One illustration of the need for this legislation is in the case of 
Sal Sodano, who was chairman and CEO of the American Stock Exchange, 
AMEX. On March 22, 2007, the SEC charged Sodano with failing to enforce 
compliance with the Exchange Act during his term as the AMEX chairman 
and CEO; however, the SEC's filing occurred after Sodano left the AMEX 
in 2005. So his lawyers pointed to this loophole in the Federal law 
that the SEC could only sanction individuals while they were still 
associated with the organization.
  The SEC's administrative law judge noted that the current law does 
not provide for sanctioning of a former officer or director. The judge 
specifically noted that Congress has drafted many statutes that allow 
the ability to sanction individuals formerly associated with any number 
of entities, but not in this case. By passing H.R. 2623, Congress can 
close this loophole and ensure accountability for individuals working 
at regulated or supervised entities.
  I urge my colleagues to support this legislation, which will provide 
more accountability, transparency, and efficiency in securities 
regulation.
  Mr. Speaker, I yield back the balance of my time.


                             General Leave

  Mr. FRANK of Massachusetts. Mr. Speaker, first I ask unanimous 
consent that all Members have 5 legislative days in which to revise and 
extend their remarks and include extraneous material on this bill and 
the preceding bill, H.R. 3139.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Massachusetts?
  There was no objection.
  Mr. FRANK of Massachusetts. I congratulate the gentleman from 
California on his work.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore. The question is on the motion offered by the 
gentleman from Massachusetts (Mr. Frank) that the House suspend the 
rules and pass the bill, H.R. 2623.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill was passed.
  A motion to reconsider was laid on the table.

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