[House Report 116-399]
[From the U.S. Government Publishing Office]


116th Congress  }                                             {   Report
                         HOUSE OF REPRESENTATIVES
2d Session      }                                             {  116-399

======================================================================



 
 STRENGTHENING FRAUD PROTECTION PROVISIONS FOR SEC ENFORCEMENT ACT OF 
                                  2019




 February 21, 2020.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

  Ms. Waters, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 3701]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 3701) to establish a statute of limitations for 
certain actions of the Securities and Exchange Commission, and 
for other purposes, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill as amended do pass.

                                CONTENTS

                                                                   Page
Purpose and Summary..............................................     2
Background and Need for Legislation..............................     2
Section-by-Section Analysis......................................     3
Hearings.........................................................     3
Committee Consideration..........................................     3
Committee Votes..................................................     4
Statement of Oversight Findings and Recommendations of the 
  Committee......................................................     6
Statement of Performance Goals and Objectives....................     6
New Budget Authority and CBO Cost Estimate.......................     6
Committee Cost Estimate..........................................    11
Unfunded Mandate Statement.......................................    11
Advisory Committee...............................................    11
Application of Law to the Legislative Branch.....................    11
Earmark Statement................................................    11
Duplication of Federal Programs..................................    12
Changes to Existing Law..........................................    12

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Strengthening Fraud Protection 
Provisions for SEC Enforcement Act of 2019''

SEC. 2. STATUTE OF LIMITATIONS FOR COMMISSION ACTIONS.

  (a) In General.--Section 21 of the Securities Exchange Act of 1934 
(15 U.S.C. 75u) is amended by adding at the end the following:
  ``(j) Statute of Limitations.--
          ``(1) Civil monetary penalties.--
                  ``(A) In general.--An action or proceeding brought or 
                instituted by the Commission under any provision of the 
                securities laws for a civil monetary penalty may be 
                brought not later than 10 years after the alleged 
                violation.
                  ``(B) Exclusion.--The period of limitations in 
                subparagraph (A) does not run during any time when an 
                alleged violator is absent from the United States or 
                has no reasonably ascertainable place of abode or work 
                within the United States.
          ``(2) Definition.--For purposes of this subsection, the term 
        `civil monetary penalty' means relief sought by the Commission 
        under--
                  ``(A) subsection (d)(3), section 10A(d), section 
                21A(a), section 21B(a), or subsection (b), (c)(1)(B), 
                or (c)(2)(B) of section 32 (15 U.S.C. 75j-1(d), 75u-
                2(a), 75ff(b), 75ff(c)(1)(B), or 75ff(c)(2)(B));
                  ``(B) section 5A(g)(2) or section 20(d)(2) of the 
                Securities Act of 1933 (15 U.S.C. 77h-1(g)(2), 
                77t(d)(2));
                  ``(C) section 9(d)(1) or 42(e)(1) of the Investment 
                Company Act of 1940 (15 U.S.C. 50a-9(d)(1), 50a-
                41(e)(1));
                  ``(D) section 203(i)(1) or 209(e)(1) of the 
                Investment Advisers Act of 1940 (15 U.S.C. 50b-3(i)(1), 
                50b-9(e)(1)); or
                  ``(E) section 304(a) of the Sarbanes-Oxley Act of 
                2002 (15 U.S.C. 7243(a)).''.
  (b) Conforming Amendment.--Section 21A(d) of the Securities Exchange 
Act of 1934 (15 U.S.C. 75u-1(d)) is amended by striking paragraph (5).

                          Purpose and Summary

    On July 11, 2019, Representative Vincente Gonzalez 
introduced H.R. 3701, the Strengthening Fraud Protection 
Provisions for SEC Enforcement Act of 2019, which would provide 
the Securities and Exchange Commission (SEC) with a 10-year 
statute of limitations for civil monetary penalties, which 
would begin on the date at which the violation occurred.

                  Background and Need for Legislation

    In Gabelli v. SEC, the Supreme Court held that the SEC has 
a five-year limit, or statute of limitations, to seek a civil 
penalty against a defendant and that the five-year limit begins 
at the date the violation occurs, not the date the SEC 
discovered it.\1\ This bill would overturn that holding and 
provide the SEC with a 10 year limitation. The bill is similar 
to a bill in the Senate from the 114th Congress (S. 1960).
---------------------------------------------------------------------------
    \1\Gabelli v. SEC, 565 U.S. 442 (2013).
---------------------------------------------------------------------------
    At a June hearing before the Subcommittee on Investor 
Protection, Entrepreneurship, and Capital Markets, Professor 
Urska Velikonja of Georgetown University stated that if the 
Gabelli ruling remains the governing law for civil monetary 
penalties in securities enforcement cases, ``securities 
violators could defraud investors with impunity, so long as 
they avoid prosecution for five years.''\2\ Former SEC 
prosecutor Jordan Thomas echoed this noting that this 
legislative response would help strengthen the SEC's 
``enforcement arsenal'' because ``many of the largest and most 
egregious securities violations occur over extended periods of 
time . . . Thus, lengthening the statute of limitations for 
civil money penalties to 10 years would better enable the 
Commission to seek and obtain penalties commensurate with the 
full scope of the violation in such cases.''\3\ This bill is 
supported by the North American Securities Administrators 
Association (NASAA) and Public Citizen.
---------------------------------------------------------------------------
    \2\ Putting Investors First: Examining Proposals to Strengthen 
Enforcement Against Securities Law Violators, Hearing before the 
Subcomm. on Investor Protection, Entrepreneurship, and Capital Markets 
of the H. Comm on Financial Services, 116th Cong. (2019) (statement of 
Urska Velikonja, Professor, Georgetown University).
    \3\ Putting Investors First: Examining Proposals to Strengthen 
Enforcement Against Securities Law Violators, Hearing before the 
Subcomm. on Investor Protection, Entrepreneurship, and Capital Markets 
of the H. Comm on Financial Services, 116th Cong. (2019) (statement of 
Jordan Thomas).
---------------------------------------------------------------------------

                      Section-by-Section Analysis


Section 1. Short title

    This section provides that H.R. 3701 may be cited as the 
Strengthening Fraud Protections Provisions for SEC Enforcement 
Act of 2019.

Section 2. Statute of limitations for commission actions

    Subsection (a) amends section 21 of the Securities Exchange 
Act of 1934 by adding a new subsection (j). The new subsection 
(j) provides that an action or proceeding brought or instituted 
by the SEC is subject to a 10-year statute of limitations after 
the alleged violation. The statute of limitations does not run 
during any time when the alleged violator is absent from the 
United States or has no reasonable ascertainable place of abode 
or work within the United States. The subsection also clarifies 
that the term ``civil monetary penalty'' under the act is the 
same term as defined under the relevant securities laws.
    Subsection (b) of this section makes a conforming 
amendment.

                                Hearings

    For the purposes of section 103(i) of H. Res. 6 for the 
116th Congress, the Committee on Financial Services' 
Subcommittee on Investor Protection, Entrepreneurship, and 
Capital Markets held a hearing to consider H.R. 3701 entitled, 
``Putting Investors First: Examining Proposals to Strengthen 
Enforcement Against Securities Law Violators'' on June 19, 
2019. Testifying before the Committee was Jordan A. Thomas, 
Partner, Labaton Sucharow; Urska Velikonja, Professor of Law, 
Georgetown University Law Center; Andrew N. Vollmer, Professor 
of Law, University of Virginia School of Law; and Stephen 
Crimmins, Partner, Murphy & McGonigle, PC.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
July 16, 2019, and ordered H.R. 3701 to be reported favorably 
to the House with an amendment in the nature of a substitute by 
a vote of 33 yeas and 25 nays, a quorum being present.

                  Committee Votes and Roll Call Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
following roll call votes occurred during the Committee's 
consideration of H.R. 3701:


  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
the Committee's oversight findings and recommendations are 
reflected in the descriptive portions of this report.

             Statement of Performance Goals and Objectives

    Pursuant to clause (3)(c) of rule XIII of the Rules of the 
House of Representatives, the goals of H.R. 3701 are to ensure 
that the SEC has a longer time period to bring actions for 
civil monetary penalties.

               New Budget Authority and CBO Cost Estimate

    Pursuant to clause 3(c)(2) of rule XIII of the Rules of the 
House of Representatives and section 305(a) of the 
Congressional Budget Act of 1974, and pursuant to clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following estimate for 
H.R. 3701 from the Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, February 20, 2020.
Hon. Maxine Waters,
Chairwoman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Madam Chairwoman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3701, the 
Strengthening Fraud Protection Provision for SEC Enforcement 
Act of 2019.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Nathaniel 
Frentz.
            Sincerely,
                                             Mark P. Hadley
                                 (For Phillip L. Swagel, Director).
    Enclosure.

    
    

    The bill would:
           Lengthen the statute of limitations for the 
        Securities and Exchange Commission (SEC) to seek civil 
        monetary penalties for violations of securities law.
    Estimated budgetary effects would primarily stem from:
           Increased collections of civil monetary 
        penalties and distributions to harmed investors;
           Increased payments to whistleblowers.
    Areas of significant uncertainty include:
           Predicting the amount of penalties that the 
        SEC orders, collects, and distributes under current law 
        and how those collections and related spending would 
        change under the bill;
           Estimating the amount and timing of payments 
        to whistleblowers.
    Bill summary: H.R. 3701 would allow the Securities and 
Exchange Commission (SEC) to seek a civil monetary penalty from 
a securities law violator for 10 years after an alleged 
violation. Under current law, the statute of limitations is 5 
years.
    Estimated Federal cost: The estimated budgetary effect of 
H.R. 3701 is shown in Table 1. The costs of the legislation 
fall within budget function 370 (commerce and housing credit).

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          By fiscal year, millions of dollars--
                                ------------------------------------------------------------------------------------------------------------------------
                                   2020     2021     2022     2023     2024     2025     2026     2027     2025     2029     2030   2020-2025  2020-2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Increases in Revenues
 
Estimated Revenues.............       30      140      140       70       50       50       50       50       50       50       50       450        730
 
                                                              Increases in Direct Spending
 
Estimated Budget Authority.....        1       15       35       32       12       12       12       12       12       12       12       106        164
Estimated Outlays..............        1       15       35       32       12       12       12       12       12       12       12       106        164
 
                                        Net Decrease in the Deficit From Changes in Revenues and Direct Spending
 
Effect on the Deficit..........      -29     -125     -105      -35      -35      -35      -35      -35      -35      -35      -35      -374       -566
--------------------------------------------------------------------------------------------------------------------------------------------------------
Using information from the Securities and Exchange Commission (SEC), CBO expects that the agency would require additional staff to prosecute additional
  cases brought under the bill. However, the SEC is authorized to collect fees each year sufficient to offset its annual appropriation. Assuming
  appropriation actions consistent with that authority, CBO estimates that any net change in discretionary spending would be negligible.

    Basis of estimate: CBO assumes that H.R. 3701 will be 
enacted in 2020.
    Revenues: CBO anticipates that extending the statute of 
limitations to 10 years under H.R. 3701 would lead the SEC to 
prosecute some cases against securities law violators that it 
cannot prosecute under current law. As a result, CBO expects 
that the SEC would order and collect additional civil monetary 
penalties.
    CBO treats collections of civil monetary penalties as 
revenues in the federal budget. Using data from the SEC about 
penalties collected in recent years, CBO estimates that 
enacting H.R. 3701 would increase the collection of civil 
monetary penalties, and thus revenues, by $730 million over the 
2020-2030 period.
    Direct spending: Section 305 of the Sarbanes-Oxley Act, 
known as the Fair Fund provision, authorizes the SEC to 
distribute civil monetary penalties to harmed investors. For 
this cost estimate, CBO has displayed distributions of 
additional revenues as direct spending. Based on distribution 
patterns from enforcement actions in recent years, CBO 
estimates that H.R. 3701 would increase outlays by $140 million 
over the 2020-2030 period.
    In addition, the SEC provides monetary awards to 
whistleblowers who report violations that lead to judicial or 
administrative enforcement actions yielding more than $1 
million in penalties. Whistleblowers are eligible to receive 
between 10 percent and 30 percent of any penalties that would 
be ordered and collected. CBO expects that a small portion of 
the additional cases brought under H.R. 3701 would stem from 
whistleblower information. CBO estimates that over the 2020-
2030 period, the SEC would pay $24 million in additional 
whistleblower awards, which are recorded as direct spending in 
the federal budget.
    In total, CBO expects that enacting H.R. 3701 would 
increase direct spending by about $164 million over the 2020-
2030 period.
    Uncertainty: Because the amount of penalties that the SEC 
orders, collects, and distributes from securities law 
violations is hard to predict and varies from year to year, 
estimating the budgetary effects of H.R. 3701 is uncertain; 
collections could be higher or lower than CBO estimates. 
Several other factors also could affect the estimated change in 
revenues under the bill, including the number of additional 
cases the SEC would pursue under the lengthened statute of 
limitations, the amounts collected in civil penalties, and how 
much the SEC would return to harmed investors. In addition, 
because the amount and timing of payments to whistleblowers 
depends on factors such as the number of whistleblowers and the 
size of awards each year, all of which are hard to predict, the 
total amounts could be higher or lower than CBO estimates.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays and revenues that are 
subject to those pay-as-you-go procedures are shown in Table 2.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          By fiscal year, millions of dollars--
                                ------------------------------------------------------------------------------------------------------------------------
                                   2020     2021     2022     2023     2024     2025     2026     2027     2025     2029     2030   2020-2025  2020-2030
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Net Decrease (-) in the Deficit
 
Pay-As-You-Go Effect...........      -29     -125     -105      -35      -35      -35      -35      -35      -35      -35      -35      -374       -566
Memorandum:
    Changes in Outlays.........        1       15       35       32       12       12       12       12       12       12       12       106        164
    Changes in Revenues........       30      140      140       70       50       50       50       50       50       50       50       450        730
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Increase in long-term deficits: None.
    Mandates: If the SEC increased fees to offset the costs 
associated with implementing the bill, H.R. 3701 would increase 
the cost of an existing mandate on private entities required to 
pay those fees. CBO estimates that the incremental cost of the 
mandate would be below the annual threshold established in the 
Unfunded Mandates Reform Act (UMRA) for private-sector mandates 
($165 million in 2020, adjusted annually for inflation).
    The bill contains no intergovernmental mandates as defined 
in UMRA.
    Estimate prepared by: Revenues: Nathaniel Frentz, Direct 
Spending: David Hughes, Mandates: Rachel Austin.
    Estimate reviewed by: Joshua Shakin, Chief, Revenue 
Estimating Unit; John McClelland, Director of Tax Analysis; 
Susan Willie, Chief, Public and Private Mandates Unit; Kim 
Cawley, Chief, Natural and Physical Resources Cost Estimates 
Unit; H. Samuel Papenfuss, Deputy Director of Budget Analysis; 
Theresa Gullo, Director of Budget Analysis.

                        Committee Cost Estimate

    Clause 3(d)(1) of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison of the 
costs that would be incurred in carrying out H.R. 3701. 
However, clause 3(d)(2)(B) of that rule provides that this 
requirement does not apply when the committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

                       Unfunded Mandate Statement

    Pursuant to Section 423 of the Congressional Budget and 
Impoundment Control Act (as amended by Section 101(a)(2) of the 
Unfunded Mandates Reform Act, Pub. L. 104-4), the Committee 
adopts as its own the estimate of federal mandates regarding 
H.R. 3701, as amended, prepared by the Director of the 
Congressional Budget Office.

                           Advisory Committee

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation

              Application of Law to the Legislative Branch

    Pursuant to section 102(b)(3) of the Congressional 
Accountability Act, Pub. L. No. 104-1, H.R. 3701, as amended, 
does not apply to terms and conditions of employment or to 
access to public services or accommodations within the 
legislative branch.

                           Earmark Statement

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 3701 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as described in clauses 9(e), 9(f), and 9(g) of rule 
XXI.

                    Duplication of Federal Programs

    Pursuant to clause 3(c)(5) of rule XIII of the Rules of the 
House of Representatives, the Committee states that no 
provision of H.R. 3701 establishes or reauthorizes a program of 
the Federal Government known to be duplicative of another 
federal program, a program that was included in any report from 
the Government Accountability Office to Congress pursuant to 
section 21 of Public Law 111-139, or a program related to a 
program identified in the most recent Catalog of Federal 
Domestic Assistance.

                        Changes to Existing Law

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, H.R. 3701, as reported, are shown as follows:

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, and existing law in which no 
change is proposed is shown in roman):

                    SECURITIES EXCHANGE ACT OF 1934

TITLE I--REGULATION OF SECURITIES EXCHANGES

           *       *       *       *       *       *       *


        investigations; injunctions and prosecution of offenses

  Sec. 21. (a)(1) The Commission may, in its discretion, make 
such investigations as it deems necessary to determine whether 
any person has violated, is violating, or is about to violate 
any provision of this title, the rules or regulations 
thereunder, the rules of a national securities exchange or 
registered securities association of which such person is a 
member or a person associated, or, as to any act or practice, 
or omission to act, while associated with a member, formerly 
associated with a member, the rules of a registered clearing 
agency in which such person is a participant, or, as to any act 
or practice, or omission to act, while a participant, was a 
participant, the rules of the Public Company Accounting 
Oversight Board, of which such person is a registered public 
accounting firm, a person associated with such a firm, or, as 
to any act, practice, or omission to act, while associated with 
such firm, a person formerly associated with such a firm, or 
the rules of the Municipal Securities Rulemaking Board, and may 
require or permit any person to file with it a statement in 
writing, under oath or otherwise as the Commission shall 
determine, as to all the facts and circumstances concerning the 
matter to be investigated. The Commission is authorized in its 
discretion, to publish information concerning any such 
violations, and to investigate any facts, conditions, 
practices, or matters which it may deem necessary or proper to 
aid in the enforcement of such provisions, in the prescribing 
of rules and regulations under this title, or in securing 
information to serve as a basis for recommending further 
legislation concerning the matters to which this title relates.
  (2) On request from a foreign securities authority, the 
Commission may provide assistance in accordance with this 
paragraph if the requesting authority states that the 
requesting authority is conducting an investigation which it 
deems necessary to determine whether any person has violated, 
is violating, or is about to violate any laws or rules relating 
to securities matters that the requesting authority administers 
or enforces. The Commission may, in its discretion, conduct 
such investigation as the Commission deems necessary to collect 
information and evidence pertinent to the request for 
assistance. Such assistance may be provided without regard to 
whether the facts stated in the request would also constitute a 
violation of the laws of the United States. In deciding whether 
to provide such assistance, the Commission shall consider 
whether (A) the requesting authority has agreed to provide 
reciprocal assistance in securities matters to the Commission; 
and (B) compliance with the request would prejudice the public 
interest of the United States.
  (b) For the purpose of any such investigation, or any other 
proceeding under this title, any member of the Commission or 
any officer designated by it is empowered to administer oaths 
and affirmations, subpoena witnesses, compel their attendance, 
take evidence, and require the production of any books, papers, 
correspondence, memoranda, or other records which the 
Commission deems relevant or material to the inquiry. Such 
attendance of witnesses and the production of any such records 
may be required from any place in the United States or any 
State at any designated place of hearing.
  (c) In case of contumacy by, or refusal to obey a subpoena 
issued to, any person, the Commission may invoke the aid of any 
court of the United States within the jurisdiction of which 
such investigation or proceeding is carried on, or where such 
person resides or carries on business, in requiring the 
attendance and testimony of witnesses and the production of 
books, papers, correspondence, memoranda, and other records. 
And such court may issue an order requiring such person to 
appear before the Commission or member or officer designated by 
the Commission, there to produce records, if so ordered, or to 
give testimony touching the matter under investigation or in 
question; and any failure to obey such order of the court may 
be punished by such court as a contempt thereof. All process in 
any such case may be served in the judicial district whereof 
such person is an inhabitant or wherever he may be found. Any 
person who shall, without just cause, fail or refuse to attend 
and testify or to answer any lawful inquiry or to produce 
books, papers, correspondence, memoranda, and other records, if 
in his power so to do, in obedience to the subpoena of the 
Commission, shall be guilty of a misdemeanor and, upon 
conviction, shall be subject to a fine of not more than $1,000 
or to imprisonment for a term of not more than one year, or 
both.
  (d)(1) Whenever it shall appear to the Commission that any 
person is engaged or is about to engage in acts or practices 
constituting a violation of any provision of this title, the 
rules or regulations thereunder, the rules of a national 
securities exchange or registered securities association of 
which such person is a member or a person associated with a 
member, the rules of a registered clearing agency in which such 
person is a participant, the rules of the Public Company 
Accounting Oversight Board, of which such person is a 
registered public accounting firm or a person associated with 
such a firm, or the rules of the Municipal Securities 
Rulemaking Board, it may in its discretion bring an action in 
the proper district court of the United States, the United 
States District Court for the District of Columbia, or the 
United States courts of any territory or other place subject to 
the jurisdiction of the United States, to enjoin such acts or 
practices, and upon a proper showing a permanent or temporary 
injunction or restraining order shall be granted without bond. 
The Commission may transmit such evidence as may be available 
concerning such acts or practices as may constitute a violation 
of any provision of this title or the rules or regulations 
thereunder to the Attorney General, who may, in his discretion, 
institute the necessary criminal proceedings under this title.
  (2) Authority of a Court To Prohibit Persons From Serving as 
Officers and Directors.--In any proceeding under paragraph (1) 
of this subsection, the court may prohibit, conditionally or 
unconditionally, and permanently or for such period of time as 
it shall determine, any person who violated section 10(b) of 
this title or the rules or regulations thereunder from acting 
as an officer or director of any issuer that has a class of 
securities registered pursuant to section 12 of this title or 
that is required to file reports pursuant to section 15(d) of 
this title if the person's conduct demonstrates unfitness to 
serve as an officer or director of any such issuer.
  (3) Money Penalties in Civil Actions.--
          (A) Authority of commission.--Whenever it shall 
        appear to the Commission that any person has violated 
        any provision of this title, the rules or regulations 
        thereunder, or a cease-and-desist order entered by the 
        Commission pursuant to section 21C of this title, other 
        than by committing a violation subject to a penalty 
        pursuant to section 21A, the Commission may bring an 
        action in a United States district court to seek, and 
        the court shall have jurisdiction to impose, upon a 
        proper showing, a civil penalty to be paid by the 
        person who committed such violation.
          (B) Amount of penalty.--
                  (i) First tier.--The amount of the penalty 
                shall be determined by the court in light of 
                the facts and circumstances. For each 
                violation, the amount of the penalty shall not 
                exceed the greater of (I) $5,000 for a natural 
                person or $50,000 for any other person, or (II) 
                the gross amount of pecuniary gain to such 
                defendant as a result of the violation.
                  (ii) Second tier.--Notwithstanding clause 
                (i), the amount of penalty for each such 
                violation shall not exceed the greater of (I) 
                $50,000 for a natural person or $250,000 for 
                any other person, or (II) the gross amount of 
                pecuniary gain to such defendant as a result of 
                the violation, if the violation described in 
                subparagraph (A) involved fraud, deceit, 
                manipulation, or deliberate or reckless 
                disregard of a regulatory requirement.
                  (iii) Third tier.--Notwithstanding clauses 
                (i) and (ii), the amount of penalty for each 
                such violation shall not exceed the greater of 
                (I) $100,000 for a natural person or $500,000 
                for any other person, or (II) the gross amount 
                of pecuniary gain to such defendant as a result 
                of the violation, if--
                          
                          (aa) the violation described in 
                        subparagraph (A) involved fraud, 
                        deceit, manipulation, or deliberate or 
                        reckless disregard of a regulatory 
                        requirement; and
                          (bb) such violation directly or 
                        indirectly resulted in substantial 
                        losses or created a significant risk of 
                        substantial losses to other persons.
          (C) Procedures for collection.--
                  (i) Payment of penalty to treasury.--A 
                penalty imposed under this section shall be 
                payable into the Treasury of the United States, 
                except as otherwise provided in section 308 of 
                the Sarbanes-Oxley Act of 2002 and section 21F 
                of this title.
                  (ii) Collection of penalties.--If a person 
                upon whom such a penalty is imposed shall fail 
                to pay such penalty within the time prescribed 
                in the court's order, the Commission may refer 
                the matter to the Attorney General who shall 
                recover such penalty by action in the 
                appropriate United States district court.
                  (iii) Remedy not exclusive.--The actions 
                authorized by this paragraph may be brought in 
                addition to any other action that the 
                Commission or the Attorney General is entitled 
                to bring.
                  (iv) Jurisdiction and venue.--For purposes of 
                section 27 of this title, actions under this 
                paragraph shall be actions to enforce a 
                liability or a duty created by this title.
          (D) Special provisions relating to a violation of a 
        cease-and-desist order.--In an action to enforce a 
        cease-and-desist order entered by the Commission 
        pursuant to section 21C, each separate violation of 
        such order shall be a separate offense, except that in 
        the case of a violation through a continuing failure to 
        comply with the order, each day of the failure to 
        comply shall be deemed a separate offense.
          (4) Prohibition of attorneys' fees paid from 
        commission disgorgement funds.--Except as otherwise 
        ordered by the court upon motion by the Commission, or, 
        in the case of an administrative action, as otherwise 
        ordered by the Commission, funds disgorged as the 
        result of an action brought by the Commission in 
        Federal court, or as a result of any Commission 
        administrative action, shall not be distributed as 
        payment for attorneys' fees or expenses incurred by 
        private parties seeking distribution of the disgorged 
        funds.
  (5) Equitable Relief.--In any action or proceeding brought or 
instituted by the Commission under any provision of the 
securities laws, the Commission may seek, and any Federal court 
may grant, any equitable relief that may be appropriate or 
necessary for the benefit of investors.
  (6) Authority of a court to prohibit persons from 
participating in an offering of penny stock.--
          (A) In general.--In any proceeding under paragraph 
        (1) against any person participating in, or, at the 
        time of the alleged misconduct who was participating 
        in, an offering of penny stock, the court may prohibit 
        that person from participating in an offering of penny 
        stock, conditionally or unconditionally, and 
        permanently or for such period of time as the court 
        shall determine.
          (B) Definition.--For purposes of this paragraph, the 
        term ``person participating in an offering of penny 
        stock'' includes any person engaging in activities with 
        a broker, dealer, or issuer for purposes of issuing, 
        trading, or inducing or attempting to induce the 
        purchase or sale of, any penny stock. The Commission 
        may, by rule or regulation, define such term to include 
        other activities, and may, by rule, regulation, or 
        order, exempt any person or class of persons, in whole 
        or in part, conditionally or unconditionally, from 
        inclusion in such term.
  (e) Upon application of the Commission the district courts of 
the United States and the United States courts of any territory 
or other place subject to the jurisdiction of the United States 
shall have jurisdiction to issue writs of mandamus, 
injunctions, and orders commanding (1) any person to comply 
with the provisions of this title, the rules, regulations, and 
orders thereunder, the rules of a national securities exchange 
or registered securities association of which such person is a 
member or person associated with a member, the rules of a 
registered clearing agency in which such person is a 
participant, the rules of the Public Company Accounting 
Oversight Board, of which such person is a registered public 
accounting firm or a person associated with such a firm, the 
rules of the Municipal Securities Rulemaking Board, or any 
undertaking contained in a registration statement as provided 
in subsection (d) of section 15 of this title, (2) any national 
securities exchange or registered securities association to 
enforce compliance by its members and persons associated with 
its members with the provisions of this title, the rules, 
regulations, and orders thereunder, and the rules of such 
exchange or association, or (3) any registered clearing agency 
to enforce compliance by its participants with the provisions 
of the rules of such clearing agency.
  (f) Notwithstanding any other provision of this title, the 
Commission shall not bring any action pursuant to subsection 
(d) or (e) of this section against any person for violation of, 
or to command compliance with, the rules of a self-regulatory 
organization or the Public Company Accounting Oversight Board 
unless it appears to the Commission that (1) such self-
regulatory organization or the Public Company Accounting 
Oversight Board is unable or unwilling to take appropriate 
action against such person in the public interest and for the 
protection of investors, or (2) such action is otherwise 
necessary or appropriate in the public interest or for the 
protection of investors.
  (g) Notwithstanding the provisions of section 1407(a) of 
title 28, United States Code, or any other provision of law, no 
action for equitable relief instituted by the Commission 
pursuant to the securities laws shall be consolidated or 
coordinated with other actions not brought by the Commission, 
even though such other actions may involve common questions of 
fact, unless such consolidation is consented to by the 
Commission.
  (h)(1) The Right to Financial Privacy Act of 1978 shall apply 
with respect to the Commission, except as otherwise provided in 
this subsection.
  (2) Notwithstanding section 1105 or 1107 of the Right to 
Financial Privacy Act of 1978, the Commission may have access 
to and obtain copies of, or the information contained in 
financial records of a customer from a financial institution 
without prior notice to the customer upon an ex parte showing 
to an appropriate United States district court that the 
Commission seeks such financial records pursuant to a subpoena 
issued in conformity with the requirements of section 19(b) of 
the Securities Act of 1933, section 21(b) of the Securities 
Exchange Act of 1934, section 42(b) of the Investment Company 
Act of 1940, or section 209(b) of the Investment Advisers Act 
of 1940, and that the Commission has reason to believe that--
          (A) delay in obtaining access to such financial 
        records, or the required notice, will result in--
                  (i) flight from prosecution;
                  (ii) destruction of or tampering with 
                evidence;
                  (iii) transfer of assets or records outside 
                the territorial limits of the United States;
                  (iv) improper conversion of investor assets; 
                or
                  (v) impeding the ability of the Commission to 
                identify or trace the source or disposition of 
                funds involved in any securities transaction;
          (B) such financial records are necessary to identify 
        or trace the record or beneficial ownership interest in 
        any security;
          (C) the acts, practices or course of conduct under 
        investigation involve--
                  (i) the dissemination of materially false or 
                misleading information concerning any security, 
                issuer, or market, or the failure to make 
                disclosures required under the securities laws, 
                which remain uncorrected; or
                  (ii) a financial loss to investors or other 
                persons protected under the securities laws 
                which remains substantially uncompensated; or
          (D) the acts, practices or course of conduct under 
        investigation--
                  (i) involve significant financial speculation 
                in securities; or
                  (ii) endanger the stability of any financial 
                or investment intermediary.
  (3) Any application under paragraph (2) for a delay in notice 
shall be made with reasonable specificity.
  (4)(A) Upon a showing described in paragraph (2), the 
presiding judge or magistrate shall enter an ex parte order 
granting the requested delay for a period not to exceed ninety 
days and an order prohibiting the financial institution 
involved from disclosing that records have been obtained or 
that a request for records has been made.
  (B) Extensions of the period of delay of notice provided in 
subparagraph (A) of up to ninety days each may be granted by 
the court upon application, but only in accordance with this 
subsection or section 1109(a), (b)(1), or (b)(2) of the Right 
to Financial Privacy Act of 1978.
  (C) Upon expiration of the period of delay of notification 
ordered under subparagraph (A) or (B), the customer shall be 
served with or mailed a copy of the subpena insofar as it 
applies to the customer together with the following notice 
which shall describe with reasonable specificity the nature of 
the investigation for which the Commission sought the financial 
records:

           *       *       *       *       *       *       *

  (5) Upon application by the Commission, all proceedings 
pursuant to paragraphs (2) and (4) shall be held in camera and 
the records thereof sealed until expiration of the period of 
delay or such other date as the presiding judge or magistrate 
may permit.
  (7)(A) Following the expiration of the period of delay of 
notification ordered by the court pursuant to paragraph (4) of 
this subsection, the customer may, upon motion, reopen the 
proceeding in the district court which issued the order. If the 
presiding judge or magistrate finds that the movant is the 
customer to whom the records obtained by the Commission 
pertain, and that the Commission has obtained financial records 
or information contained therein in violation of this 
subsection, other than paragraph (1), it may order that the 
customer be granted civil penalties against the Commission in 
an amount equal to the sum of--
          (i) $100 without regard to the volume of records 
        involved;
          (ii) any out-of-pocket damages sustained by the 
        customer as a direct result of the disclosure; and
          (iii) if the violation is found to have been willful, 
        intentional, and without good faith, such punitive 
        damages as the court may allow, together with the costs 
        of the action and reasonable attorney's fees as 
        determined by the court.
  (B) Upon a finding that the Commission has obtained financial 
records or information contained therein in violation of this 
subsection, other than paragraph (1), the court, in its 
discretion, may also or in the alternative issue injunctive 
relief to require the Commission to comply with this subsection 
with respect to any subpena which the Commission issues in the 
future for financial records of such customer for purposes of 
the same investigation.
  (C) Whenever the court determines that the Commission has 
failed to comply with this subsection, other than paragraph 
(1), and the court finds that the circumstances raise questions 
of whether an officer or employee of the Commission acted in a 
willful and intentional manner and without good faith with 
respect to the violation, the Office of Personnel Management 
shall promptly initiate a proceeding to determine whether 
disciplinary action is warranted against the agent or employee 
who was primarily responsible for the violation. After 
investigating and considering the evidence submitted, the 
Office of Personnel Management shall submit its findings and 
recommendations to the Commission and shall send copies of the 
findings and recommendations to the officer or employee or his 
representative. The Commission shall take the corrective action 
that the Office of Personnel Management recommends.
  (8) The relief described in paragraphs (7) and (10) shall be 
the only remedies or sanctions available to a customer for a 
violation of this subsection, other than paragraph (1), and 
nothing herein or in the Right to Financial Privacy Act of 1978 
shall be deemed to prohibit the use in any investigation or 
proceeding of financial records, or the information contained 
therein, obtained by a subpena issued by the Commission. In the 
case of an unsuccessful action under paragraph (7), the court 
shall award the costs of the action and attorney's fees to the 
Commission if the presiding judge or magistrate finds that the 
customer's claims were made in bad faith.
  (9)(A) The Commission may transfer financial records or the 
information contained therein to any government authority if 
the Commission proceeds as a transferring agency in accordance 
with section 1112 of the Right to Financial Privacy Act of 
1978, except that the customer notice required under section 
1112(b) or (c) of such Act may be delayed upon a showing by the 
Commission, in accordance with the procedure set forth in 
paragraphs (4) and (5), that one or more of subparagraphs (A) 
through (D) of paragraph (2) apply.
  (B) The Commission may, without notice to the customer 
pursuant to section 1112 of the Right to Financial Privacy Act 
of 1978, transfer financial records or the information 
contained therein to a State securities agency or to the 
Department of Justice. Financial records or information 
transferred by the Commission to the Department of Justice or 
to a State securities agency pursuant to the provisions of this 
subparagraph may be disclosed or used only in an 
administrative, civil, or criminal action or investigation by 
the Department of Justice or the State securities agency which 
arises out of or relates to the acts, practices, or courses of 
conduct investigated by the Commission, except that if the 
Department of Justice or the State securities agency determines 
that the information should be disclosed or used for any other 
purpose, it may do so if it notifies the customer, except as 
otherwise provided in the Right to Financial Privacy Act of 
1978, within 30 days of its determination, or complies with the 
requirements of section 1109 of such Act regarding delay of 
notice.
  (10) Any government authority violating paragraph (9) shall 
be subject to the procedures and penalties applicable to the 
Commission under paragraph (7)(A) with respect to a violation 
by the Commission in obtaining financial records.
  (11) Notwithstanding the provisions of this subsection, the 
Commission may obtain financial records from a financial 
institution or transfer such records in accordance with 
provisions of the Right to Financial Privacy Act of 1978.
  (12) Nothing in this subsection shall enlarge or restrict any 
rights of a financial institution to challenge requests for 
records made by the Commission under existing law. Nothing in 
this subsection shall entitle a customer to assert any rights 
of a financial institution.
  (13) Unless the context otherwise requires, all terms defined 
in the Right to Financial Privacy Act of 1978 which are common 
to this subsection shall have the same meaning as in such Act.
  (i) Information to CFTC.--The Commission shall provide the 
Commodity Futures Trading Commission with notice of the 
commencement of any proceeding and a copy of any order entered 
by the Commission against any broker or dealer registered 
pursuant to section 15(b)(11), any exchange registered pursuant 
to section 6(g), or any national securities association 
registered pursuant to section 15A(k).
  (j) Statute of Limitations.--
          (1) Civil monetary penalties.--
                  (A) In general.--An action or proceeding 
                brought or instituted by the Commission under 
                any provision of the securities laws for a 
                civil monetary penalty may be brought not later 
                than 10 years after the alleged violation.
                  (B) Exclusion.--The period of limitations in 
                subparagraph (A) does not run during any time 
                when an alleged violator is absent from the 
                United States or has no reasonably 
                ascertainable place of abode or work within the 
                United States.
          (2) Definition.--For purposes of this subsection, the 
        term ``civil monetary penalty'' means relief sought by 
        the Commission under--
                  (A) subsection (d)(3), section 10A(d), 
                section 21A(a), section 21B(a), or subsection 
                (b), (c)(1)(B), or (c)(2)(B) of section 32 (15 
                U.S.C. 78j-1(d), 78u-2(a), 78ff(b), 
                78ff(c)(1)(B), or 78ff(c)(2)(B));
                  (B) section 8A(g)(2) or section 20(d)(2) of 
                the Securities Act of 1933 (15 U.S.C. 77h-
                1(g)(2), 77t(d)(2));
                  (C) section 9(d)(1) or 42(e)(1) of the 
                Investment Company Act of 1940 (15 U.S.C. 80a-
                9(d)(1), 80a-41(e)(1));
                  (D) section 203(i)(1) or 209(e)(1) of the 
                Investment Advisers Act of 1940 (15 U.S.C. 80b-
                3(i)(1), 80b-9(e)(1)); or
                  (E) section 304(a) of the Sarbanes-Oxley Act 
                of 2002 (15 U.S.C. 7243(a)).

                  civil penalties for insider trading

  Sec. 21A. (a) Authority To Impose Civil Penalties.--
          (1) Judicial actions by commission authorized.--
        Whenever it shall appear to the Commission that any 
        person has violated any provision of this title or the 
        rules or regulations thereunder by purchasing or 
        selling a security or security-based swap agreement 
        while in possession of material, nonpublic information 
        in, or has violated any such provision by communicating 
        such information in connection with, a transaction on 
        or through the facilities of a national securities 
        exchange or from or through a broker or dealer, and 
        which is not part of a public offering by an issuer of 
        securities other than standardized options or security 
        futures products, the Commission--
                  (A) may bring an action in a United States 
                district court to seek, and the court shall 
                have jurisdiction to impose, a civil penalty to 
                be paid by the person who committed such 
                violation; and
                  (B) may, subject to subsection (b)(1), bring 
                an action in a United States district court to 
                seek, and the court shall have jurisdiction to 
                impose, a civil penalty to be paid by a person 
                who, at the time of the violation, directly or 
                indirectly controlled the person who committed 
                such violation.
          (2) Amount of penalty for person who committed 
        violation.--The amount of the penalty which may be 
        imposed on the person who committed such violation 
        shall be determined by the court in light of the facts 
        and circumstances, but shall not exceed three times the 
        profit gained or loss avoided as a result of such 
        unlawful purchase, sale, or communication.
          (3) Amount of penalty for controlling person.--The 
        amount of the penalty which may be imposed on any 
        person who, at the time of the violation, directly or 
        indirectly controlled the person who committed such 
        violation, shall be determined by the court in light of 
        the facts and circumstances, but shall not exceed the 
        greater of $1,000,000, or three times the amount of the 
        profit gained or loss avoided as a result of such 
        controlled person's violation. If such controlled 
        person's violation was a violation by communication, 
        the profit gained or loss avoided as a result of the 
        violation shall, for purposes of this paragraph only, 
        be deemed to be limited to the profit gained or loss 
        avoided by the person or persons to whom the controlled 
        person directed such communication.
  (b) Limitations on Liability.--
          (1) Liability of controlling persons.--No controlling 
        person shall be subject to a penalty under subsection 
        (a)(1)(B) unless the Commission establishes that--
                  (A) such controlling person knew or 
                recklessly disregarded the fact that such 
                controlled person was likely to engage in the 
                act or acts constituting the violation and 
                failed to take appropriate steps to prevent 
                such act or acts before they occurred; or
                  (B) such controlling person knowingly or 
                recklessly failed to establish, maintain, or 
                enforce any policy or procedure required under 
                section 15(f) of this title or section 204A of 
                the Investment Advisers Act of 1940 and such 
                failure substantially contributed to or 
                permitted the occurrence of the act or acts 
                constituting the violation.
          (2) Additional restrictions on liability.--No person 
        shall be subject to a penalty under subsection (a) 
        solely by reason of employing another person who is 
        subject to a penalty under such subsection, unless such 
        employing person is liable as a controlling person 
        under paragraph (1) of this subsection. Section 20(a) 
        of this title shall not apply to actions under 
        subsection (a) of this section.
  (c) Authority of Commission.--the Commission, by such rules, 
regulations, and orders as it considers necessary or 
appropriate in the public interest or for the protection of 
investors, may exempt, in whole or in part, either 
unconditionally or upon specific terms and conditions, any 
person or transaction or class of persons or transactions from 
this section.
  (d) Procedures for Collection.--
          (1) Payment of penalty to treasury.--A penalty 
        imposed under this section shall be payable into the 
        Treasury of the United States, except as otherwise 
        provided in section 308 of the Sarbanes-Oxley Act of 
        2002 and section 21F of this title.
          (2) Collection of penalties.--If a person upon whom 
        such a penalty is imposed shall fail to pay such 
        penalty within the time prescribed in the court's 
        order, the Commission may refer the matter to the 
        Attorney General who shall recover such penalty by 
        action in the appropriate United States district court.
          (3) Remedy not exclusive.--The actions authorized by 
        this section may be brought in addition to any other 
        actions that the Commission or the Attorney General are 
        entitled to bring.
          (4) Jurisdiction and venue.--For purposes of section 
        27 of this title, actions under this section shall be 
        actions to enforce a liability or a duty created by 
        this title.
          [(5) Statute of limitations.--No action may be 
        brought under this section more than 5 years after the 
        date of the purchase or sale. This section shall not be 
        construed to bar or limit in any manner any action by 
        the Commission or the Attorney General under any other 
        provision of this title, nor shall it bar or limit in 
        any manner any action to recover penalties, or to seek 
        any other order regarding penalties, imposed in an 
        action commenced within 5 years of such transaction.]
  (e) Definition.--For purposes of this section, ``profit 
gained'' or ``loss avoided'' is the difference between the 
purchase or sale price of the security and the value of that 
security as measured by the trading price of the security a 
reasonable period after public dissemination of the nonpublic 
information.
  (f) The authority of the Commission under this section with 
respect to security-based swap agreements (as defined in 
section 206B of the Gramm-Leach-Bliley Act) shall be subject to 
the restrictions and limitations of section 3A(b) of this 
title.
  (g) Duty of Members and Employees of Congress.--
          (1) In general.--Subject to the rule of construction 
        under section 10 of the STOCK Act and solely for 
        purposes of the insider trading prohibitions arising 
        under this Act, including section 10(b) and Rule 10b-5 
        thereunder, each Member of Congress or employee of 
        Congress owes a duty arising from a relationship of 
        trust and confidence to the Congress, the United States 
        Government, and the citizens of the United States with 
        respect to material, nonpublic information derived from 
        such person's position as a Member of Congress or 
        employee of Congress or gained from the performance of 
        such person's official responsibilities.
          (2) Definitions.--In this subsection--
                  (A) the term ``Member of Congress'' means a 
                member of the Senate or House of 
                Representatives, a Delegate to the House of 
                Representatives, and the Resident Commissioner 
                from Puerto Rico; and
                  (B) the term ``employee of Congress'' means--
                          (i) any individual (other than a 
                        Member of Congress), whose compensation 
                        is disbursed by the Secretary of the 
                        Senate or the Chief Administrative 
                        Officer of the House of 
                        Representatives; and
                          (ii) any other officer or employee of 
                        the legislative branch (as defined in 
                        section 109(11) of the Ethics in 
                        Government Act of 1978 (5 U.S.C. App. 
                        109(11))).
          (3) Rule of construction.--Nothing in this subsection 
        shall be construed to impair or limit the construction 
        of the existing antifraud provisions of the securities 
        laws or the authority of the Commission under those 
        provisions.
  (h) Duty of Other Federal Officials.--
          (1) In general.--Subject to the rule of construction 
        under section 10 of the STOCK Act and solely for 
        purposes of the insider trading prohibitions arising 
        under this Act, including section 10(b), and Rule 10b-5 
        thereunder, each executive branch employee, each 
        judicial officer, and each judicial employee owes a 
        duty arising from a relationship of trust and 
        confidence to the United States Government and the 
        citizens of the United States with respect to material, 
        nonpublic information derived from such person's 
        position as an executive branch employee, judicial 
        officer, or judicial employee or gained from the 
        performance of such person's official responsibilities.
          (2) Definitions.--In this subsection--
                  (A) the term ``executive branch employee''--
                          (i) has the meaning given the term 
                        ``employee'' under section 2105 of 
                        title 5, United States Code;
                          (ii) includes--
                                  (I) the President;
                                  (II) the Vice President; and
                                  (III) an employee of the 
                                United States Postal Service or 
                                the Postal Regulatory 
                                Commission;
                  (B) the term ``judicial employee'' has the 
                meaning given that term in section 109(8) of 
                the Ethics in Government Act of 1978 (5 U.S.C. 
                App. 109(8)); and
                  (C) the term ``judicial officer'' has the 
                meaning given that term under section 109(10) 
                of the Ethics in Government Act of 1978 (5 
                U.S.C. App. 109(10)).
          (3) Rule of construction.--Nothing in this subsection 
        shall be construed to impair or limit the construction 
        of the existing antifraud provisions of the securities 
        laws or the authority of the Commission under those 
        provisions.
  (i) Participation in Initial Public Offerings.--An individual 
described in section 101(f) of the Ethics in Government Act of 
1978 may not purchase securities that are the subject of an 
initial public offering (within the meaning given such term in 
section 12(f)(1)(G)(i)) in any manner other than is available 
to members of the public generally.

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    H.R. 3701, a bill to establish a statute of limitations for 
certain actions of the Securities and Exchange Commission, and 
for other purposes, would unnecessarily extend the SEC's 
statute of limitations. The bill would allow the SEC to bring 
an action or proceeding for a civil monetary penalty for up to 
10 years after the date the violation occurs. In addition, H.R. 
3701 provides that the 10-year period is stayed at any time 
that an alleged violator of the securities laws is absent from 
the United States or has no reasonably ascertainable place of 
abode or work within the United States.
    Committee Republicans support giving the SEC all necessary 
tools to fight fraud, prosecute wrongdoers, and uphold the rule 
of law. Based upon evidence presented to the Committee, 
however, H.R. 3701 would not provide the SEC with a necessary 
tool. Committee Republicans believe the SEC is already subject 
to an appropriate statute of limitations when seeking civil 
monetary penalties. Like other agencies, the SEC is subject to 
25 U.S.C. Sec. 2462, a generally applicable statute that 
subjects agency enforcement seeking a ``civil fine, penalty, or 
forfeiture'' to a five-year statute of limitation, unless 
Congress otherwise provides for a separate statute of 
limitations. The statute is not only applicable to SEC actions, 
but to any agency enforcement. Thus, Congress has already 
established what it believes is an appropriate baseline statute 
of limitations when seeking a fine, penalty, or forfeiture. 
Absent some special showing demonstrating a need to extend the 
timeframe, a five-year statute of limitation continues to be an 
appropriate timeframe.
    Committee Republicans believe it's important to remind 
Democrats that the statute of limitations in the SEC context 
serves as an important procedural protection: it is intended to 
strike the right balance between deterring and punishing 
securities fraud with protecting the shareholders ultimately 
responsible for paying any fines or civil penalties. As time 
goes by, evidence necessarily becomes less reliable (e.g., as 
time passes, evidence can grow stale and witnesses are less 
likely to remember crucial events accurately), which can lead 
to litigation with less accurate--or even unjust--results. When 
an action includes the threat of SEC civil penalties, the harm 
of any inaccurate or unjust results is even greater.
    Beyond concern about stale evidence, the five-year statute 
of limitations has additional benefits. The current five-year 
statute of limitations encourages the SEC to move quickly and 
efficiently to initiate actions. This ensures that more 
appropriate cases are pursued, rather than stretching 
investigations over the course of a decade or longer. It could 
also encourage the SEC to prioritize its resources more on 
frauds that are more likely to harm Mom and Pop investors--
i.e., smaller-dollar frauds that harm retail investors, instead 
of spending up to a decade on a prolonged investigation of a 
high-profile, larger defendant in hopes of a big penalty.
    With those concerns noted, Committee Republicans remain 
open to considering a lengthened statute of limitations if 
there were a demonstrated need for extending the generally 
applicable five-year window. However, Democrats have not 
provided any compelling evidence that would justify such an 
extension for the SEC in seeking civil monetary penalties. 
Further, and importantly, the SEC has not asked for such an 
extension. H.R. 3701 thus seems to be a solution in search of a 
problem.

                                   David Kustoff.
                                   Lance Gooden.
                                   Scott R. Tipton.
                                   Peter King (NY).
                                   Trey Hollingsworth.
                                   Bryan Steil.
                                   Frank D. Lucas.
                                   Denver Riggleman.
                                   Lee Zeldin.
                                   Patrick T. McHenry.
                                   Steve Stivers.
                                   Blaine Luetkemeyer.
                                   William R. Timmons.
                                   Barry Loudermilk.
                                   Tom Emmer.
                                   Ted Budd.
                                   Roger Williams.
                                   J. French Hill (AR).
                                   John W. Rose.
                                   Anthony Gonzalez (OH).
                                   Andy Barr.
                                   Alex X. Mooney.
                                   Ann Wagner.
                                   Bill Huizenga.
                                   Bill Posey.
                                   Warren Davidson (OH).