Securities Fraud Enforcement and Investor Compensation Act of 2019

II 116TH CONGRESS 1ST SESSION S. 799 To amend the Securities Exchange Act of 1934 to clarify that the Securities and Exchange Commission may seek disgorgement and restitution as a result of a violation of the securities laws, to establish the statute of limitations for disgorgement and equitable actions brought by the Commission, and for other purposes. IN THE SENATE OF THE UNITED STATES MARCH 14, 2019 Mr. WARNER (for himself and Mr. KENNEDY) introduced the following bill; which was read twice and referred to the Committee on Banking, Hous- ing, and Urban Affairs A BILL To amend the Securities Exchange Act of 1934 to clarify that the Securities and Exchange Commission may seek disgorgement and restitution as a result of a violation of the securities laws, to establish the statute of limita- tions for disgorgement and equitable actions brought by the Commission, and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Securities Fraud En- 4 forcement and Investor Compensation Act of 2019’’. 5 VerDate Sep 11 2014 03:13 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S799.IS S799 kjohnson on DSK79L0C42 with BILLS 2 •S 799 IS SEC. 2. INVESTIGATIONS AND PROSECUTION OF OFFENSES 1 FOR VIOLATIONS OF THE SECURITIES LAWS. 2 (a) IN GENERAL.—Section 21(d) of the Securities 3 Exchange Act of 1934 (15 U.S.C. 78u(d)) is amended— 4 (1) in paragraph (3)— 5 (A) in the paragraph heading— 6 (i) by inserting ‘‘CIVIL’’ before 7 ‘‘MONEY PENALTIES’’; and 8 (ii) by striking ‘‘IN CIVIL ACTIONS’’ 9 and inserting ‘‘AND AUTHORITY TO SEEK 10 DISGORGEMENT’’; 11 (B) in subparagraph (A), by striking ‘‘ju- 12 risdiction to impose’’ and all that follows 13 through the period at the end and inserting the 14 following: ‘‘jurisdiction to— 15 ‘‘(i) impose, upon a proper showing, a civil 16 penalty to be paid by the person who committed 17 such violation; and 18 ‘‘(ii) require disgorgement under para- 19 graph (7) by the person who received any un- 20 just enrichment as a result of such violation.’’; 21 and 22 (C) in subparagraph (B)— 23 (i) in clause (i), in the first sentence, 24 by striking ‘‘the penalty’’ and inserting ‘‘a 25 VerDate Sep 11 2014 03:13 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S799.IS S799 kjohnson on DSK79L0C42 with BILLS 3 •S 799 IS civil penalty imposed under subparagraph 1 (A)(i)’’; 2 (ii) in clause (ii), by striking ‘‘amount 3 of penalty’’ and inserting ‘‘amount of a 4 civil penalty imposed under subparagraph 5 (A)(i)’’; and 6 (iii) in clause (iii), in the matter pre- 7 ceding item (aa), by striking ‘‘amount of 8 penalty for each such violation’’ and insert- 9 ing ‘‘amount of a civil penalty imposed 10 under subparagraph (A)(i) for each viola- 11 tion described in that subparagraph’’; 12 (2) in paragraph (4), by inserting ‘‘under para- 13 graph (7)’’ after ‘‘funds disgorged’’; and 14 (3) by adding at the end the following: 15 ‘‘(7) DISGORGEMENT.— 16 ‘‘(A) IN GENERAL.—In any action or pro- 17 ceeding brought by the Commission under any provi- 18 sion of the securities laws, the Commission may 19 seek, and any Federal court may order, disgorge- 20 ment of any unjust enrichment that a person ob- 21 tained as a result of a violation of that provision. 22 ‘‘(B) CALCULATION.—Any disgorgement that is 23 ordered with respect to a person under subpara- 24 graph (A) shall be offset by any amount of restitu- 25 VerDate Sep 11 2014 03:13 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S799.IS S799 kjohnson on DSK79L0C42 with BILLS 4 •S 799 IS tion that the person is ordered to pay under para- 1 graph (8). 2 ‘‘(8) RESTITUTION.—In any proceeding brought or 3 instituted by the Commission under any provision of the 4 securities laws, the Commission may seek, and any Fed- 5 eral court, or, with respect to a proceeding instituted by 6 the Commission, the Commission, may order restitution 7 to an investor in the amount of the loss that the investor 8 sustained as a result of a violation of that provision by 9 a person that is— 10 ‘‘(A) registered as, or required to be registered 11 as, a broker, dealer, investment adviser, municipal 12 securities dealer, municipal advisor, or transfer 13 agent; or 14 ‘‘(B) associated with or, as of the date on which 15 the violation occurs, seeking to become associated 16 with, an entity described in subparagraph (A). 17 ‘‘(9) LIMITATIONS PERIODS.— 18 ‘‘(A) DISGORGEMENT.—The Commission may 19 bring a claim for disgorgement under paragraph (7) 20 not later than 5 years after the date on which the 21 person against which the claim is brought receives 22 any unjust enrichment as a result of the violation 23 that gives rise to the action or proceeding in which 24 the Commission seeks the claim. 25 VerDate Sep 11 2014 03:13 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S799.IS S799 kjohnson on DSK79L0C42 with BILLS 5 •S 799 IS ‘‘(B) EQUITABLE REMEDIES.—The Commission 1 may seek a claim for any equitable remedy, includ- 2 ing for restitution under paragraph (8), an injunc- 3 tion, or a bar, suspension, or cease and desist order, 4 not later than 10 years after the latest date on 5 which a violation that gives rise to the claim occurs. 6 ‘‘(C) CALCULATION.—For the purposes of cal- 7 culating any limitations period under this paragraph 8 with respect to an action or claim, any time in which 9 the person against which the action or claim, as ap- 10 plicable, is brought is outside of the United States 11 shall not count towards the accrual of that period. 12 ‘‘(10) RULE OF CONSTRUCTION.—Nothing in para- 13 graph (7) or (8) may be construed as altering any right 14 that any private party may have to maintain a suit for 15 a violation of this Act.’’. 16 (b) APPLICABILITY.—The amendments made by sub- 17 section (a) shall apply with respect to any action or pro- 18 ceeding that is commenced on or after the date of enact- 19 ment of this Act. 20 Æ VerDate Sep 11 2014 03:13 Mar 27, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\S799.IS S799 kjohnson on DSK79L0C42 with BILLS