A Senate Democrat wants to give the Securities and Exchange Commission more time to ferret out fraud in the financial markets.
Sen. Jack Reed, D-R.I., introduced a bill on Wednesday that would extend the statute of limitations for the SEC to seek civil monetary penalties from five years to 10 years.
The legislation responds to a unanimous 2013 Supreme Court decision, Gabelli v. SEC, which found that the current five-year time limit for the SEC to bring charges begins when the violation occurs, not when it is discovered by the agency.
The Gabelli case involved alleged fraud by an investment adviser to a mutual fund in August 2002. The SEC did not file its case until April 2008. The defendant argued that the SEC was too slow on the draw, and the Supreme Court agreed, overturning a lower court decision.
The ruling could leave investors vulnerable to financial fraud that involves increasingly complex investment products and elaborate transactions that can be hidden from regulators for years, Mr. Reed asserted.
“We cannot allow Wall Street titans to play fast and loose with our securities laws and then run out the clock,” Mr. Reed said in a statement Friday. “This legislation gives the SEC more time to unearth wrongdoing in the financial marketplace, and sends a clear signal that securities law violators are going to need more than a stopwatch if they intend to break the law.”
Mr. Reed has only one co-sponsor for the bill so far, Sen. Jeanne Shaheen, D-N.H. Mr. Reed is a senior Democrat on the Senate Banking Committee, which is controlled by a Republican majority.
He recently introduced legislation with a Republican, Sen. Charles Grassley, R-Iowa, that would increase the penalty ceiling for SEC fines.
An aide to Mr. Reed said he also is seeking Republicans for the statute-of-limitations bill.
“Our view is that providing regulators with the resources they need to enforce our securities laws and prevent financial crimes should be a bipartisan priority,” Dan Curren, deputy press secretary for Mr. Reed, wrote in an email. “The only way to get this bill signed into law is to build consensus, and that is what Senator Reed is seeking to do.”