DD Support Board and Research Team

[1manband]

Defense Bill to Expand SEC Powers and Authority

For cases of fraud, the SEC's statute of limitations goes from 5 years to 10.

Three Key Takeaways

The new provisions explicitly authorize the SEC to seek disgorgement for violations of securities laws, settling doubts as to the SEC's authority. The changes remove current restrictions on its disgorgement authority requiring that awards be "for the benefit of investors."

Under the new provisions, the SEC will have a 10-year statute of limitations period for disgorgement awards stemming from fraud violations. Moreover, the provisions prescribe a 10-year period for all equitable remedies, including cease-and-desist orders and injunctions. Additionally, the legislation adds a provision to indefinitely toll the statute of limitations while individuals remain outside the United States.

The SEC will likely be aggressive in requiring tolling agreements on possible non-fraud claims to enable the SEC to fully utilize the new statute of limitations for fraud-based violations. Companies will need to decide whether to agree to tolling agreements and should consider strict time limits in these agreements.

https://www.jonesday.com/en/insights/2020/12/defense-bill-to-expand-sec-powers-and-authority