Washington, D.C., Sept. 11, 2008 (LAWFUEL) – Securities and Exchange Commission Chairman Christopher Cox today applauded the U.S. House of Representatives for passing legislation that would provide new investor protection measures and further bolster the SEC’s enforcement program that already is recognized as the world’s most effective and successful in policing the markets and protecting investors.
The Securities Act of 2008, sponsored by Rep. Paul Kanjorski (D-PA) with bipartisan support including House Financial Services Committee Chairman Barney Frank and Ranking Member Spencer Bachus, incorporates recommendations made by the SEC to Congress to enhance the securities laws and give the SEC’s Enforcement Division increased flexibility and resources to pursue securities fraudsters and other wrongdoers in the markets.
“The House of Representatives today passed measures that the SEC requested to improve the securities laws and provide additional tools for the SEC’s enforcement program that already is seen as the gold standard around the world. Policing the markets and keeping investors’ money safe has never been more important, and so this legislation comes at a critical time,” said Chairman Cox. “I would like to personally commend and thank Congressman Kanjorski, Chairman Frank, and Ranking Member Bachus for their outstanding leadership in shepherding this important legislation through Congress on behalf of America’s investors.”
The new tools that the legislation provides will be a boon to the SEC enforcement staff, which under Chairman Cox has increased to 34 percent of the SEC workforce from 32 percent in 2005 and 29 percent in the 1990s. This investment in investor protection already is paying significant dividends. In the past three years, the SEC has achieved the greatest number of corporate penalties in any year in SEC history, the second highest-ever number of enforcement actions brought in a single year, and the second highest-ever single-year total for penalties and disgorgements. The Securities Act of 2008 would help further strengthen this record of accomplishment through the elimination of unnecessary duplication and extraneous responsibilities for SEC enforcement staff in their pursuit of wrongdoers, by giving the SEC authority to obtain financial penalties from wrongdoers in administrative proceedings without needing to file a separate civil action in federal court.
Supporting the SEC’s enforcement efforts, as this legislation does, directly benefits injured investors. During the past month alone, the SEC’s Division of Enforcement has announced several landmark preliminary settlements that would represent the largest settlements and returns of customer money in SEC history. These resolutions of SEC enforcement investigations into auction-rate securities abuses will enable individual investors to receive more than $28.4 billion of their money back, even as the SEC investigations into individual wrongdoing continue.
Among other recent SEC enforcement successes covering a wide range of issues of critical importance to investors:
The SEC acted quickly to bring one of biggest insider trader cases since the days of Ivan Boesky.
The SEC won the second highest corporate penalty of all-time, behind only Worldcom.
The SEC set the record for the highest financial sanction against an individual in an enforcement action.
The SEC last month charged two Wall Street brokers in a $1 billion subprime-related ARS fraud.
The SEC earlier this year obtained an emergency asset freeze and charged a Rome, Italy insider trader within days of the illegal trades from outside the U.S.
The SEC earlier this year charged a Wall Street short seller with spreading false rumors.
The SEC has filed more than 30 Foreign Corrupt Practices Act (FCPA) enforcement actions since January 2006 – more than the SEC filed in the prior 28 years combined.
Each year, hundreds of thousands of ordinary investors are targeted by unscrupulous manipulators who prey upon the over-the-counter (OTC) markets in what is known as microcap fraud. The SEC has responded with a new enforcement group that is cracking down on shell company manipulators, pump-and-dump artists, and Internet spam fraudsters.
The SEC’s anti-spam initiative has been credited with a 30-percent reduction in the volume of stock market spam emails in an independent industry review.
The SEC has continued to aggressively combat scams targeting the retirement savings of America’s senior citizens, bringing more than 50 enforcement actions in the past two years against wrongdoers targeting older investors. The SEC will host its third annual Seniors Summit in Washington D.C. on September 22 to help older investors learn new ways to protect themselves from scam artists and securities swindlers.
Building on these enforcement milestones will require that the SEC’s staff have the tools they need to apprehend fraudsters and protect investors. The legislation passed by the House today would do that in a number of ways, including for the first time making nationwide service of subpoenas available in civil actions filed in federal court. It would enable the SEC to bar a wrongdoer who committed a securities law violation in one part of the securities industry from entering other segments of the industry. The bill also makes explicit the SEC’s authority to impose sanctions and other remedies on individuals who violated the securities laws while associated with a registered entity, even when they are no longer associated with that entity.
Congress has similarly provided the SEC with increased authority in past years in order to strengthen the agency’s enforcement role as the investors’ advocate. The Sarbanes-Oxley Act of 2002 provided the SEC with authority to return financial penalties through so-called “Fair Fund” distributions. Since then, SEC enforcement actions returned more than $4 billion to harmed investors. Another $1 billion in SEC Fair Fund distributions is expected in the next six months.
