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9.5 Enforcement

<< Title IX Overview

9.5 Enforcement

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9.5.       Enforcement.  The Act requires the SEC to speed up the enforcement process and expands the authority of the SEC to enforce the securities laws by, among other things, authorizing the SEC to limit mandatory arbitration of securities disputes; providing incentives and protections to whistleblowers; allowing the SEC to serve subpoenas nationwide; and expanding the authority of the SEC and the United States to prosecute violations of the securities laws.

9.5.1.    Imposition of Deadlines.  The Act establishes new deadlines for the SEC to complete enforcement investigations, examinations and inspections.  Within 180 days after the Staff of the Enforcement Division issues a Wells Notice, the SEC is required to file an enforcement action or justify why it is not filing one, unless exceptional circumstances warrant an extension of the deadline, in which case successive 180-day extensions may be obtained with appropriate notice and approval.  Similarly, within 180 days after having completed the on-site portion of a compliance examination or inspection, or after having received documents from an entity being examined or inspected, whichever is later, the SEC is required to provide the subject entity with written notice of the SEC's resolution of the examination or inspection, unless an examination or inspection involves a particularly complex issue, in which case one 180-day extension may be obtained with appropriate notice.  [§929U] 

9.5.2.    Authority To Restrict Mandatory Pre-Dispute Arbitration.  The Act authorizes the SEC to issue rules prohibiting, or imposing conditions or limitations upon, the use of agreements between brokers, dealers and municipal securities dealers, on the one hand, and their customers or clients, on the other hand, and agreements between investment advisors and their customers or clients, that require future arbitration of disputes under the securities laws or rules. [§921] 

                        9.5.3.    Whistleblower Protection.  The Act adds new incentives and protections for whistleblowers. [§922]  Qualified whistleblowers are entitled to a mandatory monetary reward for voluntarily providing certain information that leads to the successful enforcement of any action brought by the SEC under the securities laws that results in monetary sanctions exceeding $1,000,000.  Award amounts will range from at least 10 percent to not more than 30 percent of what is collected as monetary sanctions in the action.  

The SEC is required to issue final regulations implementing the whistleblower provisions of the Act not later than 270 days after the enactment of the Act. [§924]

            Employers are prohibited from retaliating against employees for any lawful whistle blowing act.  Whistleblowers who allege unlawful retaliation may sue in federal court and seek reinstatement, two times the amount of any back pay owed plus interest, reasonable attorneys' fees and costs.  Waivers or limitations of whistleblowers' rights through pre-dispute arbitration agreements are not valid or enforceable. 

9.5.4.    SEC Granted Ability To Serve Subpoenas Nationwide.  The Act allows the SEC to serve a subpoena anywhere in the United States for any action or proceeding brought in federal court under the Securities Act, the Exchange Act, the 1940 Act, or the Advisers Act.  [§929E]  

9.5.5.    Enhanced and Clarified Authority To Prosecute and Seek Remedies for Violation of the Securities Laws.  The Act expands the scope of conduct that may support a claim for aiding and abetting or control person liability under the Exchange Act and provides the SEC with additional authority to pursue remedial relief under the securities laws. 

                        9.5.5.1. Aiding and Abetting Violations of the Securities Laws.  The Act allows the SEC to prosecute claims for aiding and abetting violations of the Exchange Act if a person "knowingly or recklessly," not just knowingly, provides substantial assistance to another person.  [§929O] 

                        9.5.5.2. Expanded Ability To Seek Remedies under the Securities Act and 1940 Act.  The Act provides the SEC with the authority to seek injunctive relief and civil penalties in federal court against persons who aid and abet violations of the Securities Act and the 1940 Act. [§929M]  

                        9.5.5.3. Expanded Ability To Seek Remedies under the Advisers Act.  The Act authorizes the SEC to seek civil penalties from those charged with aiding and abetting a violation of the Advisers Act. [§929N] 

                        9.5.5.4. Enhanced Ability To Enforce the Securities Laws.  The Act provides the SEC with the authority to seek civil penalties in cease and desist proceedings under the Securities Act, the Exchange Act, the 1940 Act and the Advisers Act.  The Act provides federal courts with jurisdiction over actions involving extraterritorial conduct brought by the SEC or the United States under the anti-fraud provisions of the Securities Act, the Exchange Act and the Advisers Act.  In addition, the Act expands the scope of who can be held liable as a control person under the Exchange Act to include those who control others whom the SEC, and not just a private individual, sues for violation of the securities laws.  [§929P]