Hensarling Bill Would Boost SEC's Authority

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By Rob Tricchinelli

June 7 — A broad plan unveiled June 7 by House Financial Services Committee Chairman Jeb Hensarling (R-Texas) would increase limits on penalties for violating securities laws and give the Securities and Exchange Commission more power to collect fines from wrongdoers.

The penalty language, a new effort by House Republicans, is combined with rollbacks to the Dodd-Frank Act as well as a repeal of the ban on proprietary trading known as the Volcker Rule.

It also has a five-year window for implementing “funding, structural, and enforcement reforms” at the agency, according to a summary of the bill. The full text of the bill will be available in the coming weeks, a spokeswoman for Hensarling told Bloomberg BNA.

The measure has little chance of becoming law in an election year, plus the White House has threatened to veto major changes to Dodd-Frank.

Penalty Caps

The proposal would double penalty caps for most securities law violations and allow triple damages for illegal profits, Hensarling said in a New York speech to unveil the plan.

“We will give the SEC new authority to impose sanctions more closely linked to investor losses and increase punishments even more for repeat offenders,” he said. “We will increase the maximum criminal fines for both individuals and firms that engage in insider trading.”

The bill would also allow respondents in SEC enforcement actions to remove their case to federal court.

Capital Formation

The plan also includes several capital formation bills that have passed the House or the committee.

“Our plan gives the SEC the authority to register venture exchanges so JOBS Act companies can list on an exchange that is tailored to the needs of smaller issuers,” Hensarling said. It would also broaden the pool of accredited investors and relax startup companies' ability to hold “demo days” to show off their companies to potential investors.

It would also undo the SEC rule requiring companies to disclose the ratio of their chief executive's pay to the median pay for workers.

Reaction

Top Democrats criticized the proposal.

Rep. Maxine Waters (D-Calif.), the ranking member on Hensarling's committee, called the proposal “a special interest wish list that would deregulate the financial sector to the detriment of consumers and investors.”

“Republicans time and again have sought to make life easier for mega bankers and tougher for ordinary Americans,” Sen. Sherrod Brown (Ohio), the ranking Democrat on the Senate Banking Committee, said. “This latest proposal is more of the same.”

To contact the reporter on this story: Rob Tricchinelli in Washington at rtricchinelli@bna.com

To contact the editor responsible for this story: Susan Jenkins at sjenkins@bna.com