US enhances enforcement and investor protection

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WASHINGTON, DC – The US House of Representatives has passed legislation that will provide new investor protection and bolster the Securities and Exchange Commission’s (SEC) enforcement programme.

The Securities Act, 2008, sponsored by republican Paul Kanjorski with bipartisan support from 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.

“This bill provides new protections for investors during a very tumultuous time in our markets,” says Bachus. “The Securities Act strengthens investor protection, enhances capital markets competitiveness and increases the SEC’s effectiveness. It will prevent bad actors from moving throughout the securities industry to perpetuate fraud and provide the commission with new tools to help injured investors. Regulators will have to make financial reporting more understandable and ensure that our capital markets can compete on a level playing field with their foreign counterparts.”

SEC chairman Christopher Cox applauds the move. “Policing the markets and keeping investors’ money safe has never been more important, and so this legislation comes at a critical time,” he says.

Under Cox, the SEC’s enforcement staff has increased to 34% of the SEC workforce from 32% in 2005 and 29% in the 1990s. This investment in investor protection has paid 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 number of enforcement actions brought in a single year, and the second highest single-year total for penalties and disgorgements. The SEC claims the Securities Act will help it to further strengthen this record through the “elimination of 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”.

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