I

108TH CONGRESS

1ST SESSION H. R. 2179

To enhance the authority of the Securities and Exchange Commission to

investigate, punish, and deter securities laws violations, and to improve

its ability to return funds to defrauded investors, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MAY 21, 2003

Mr. BAKER (for himself, Mr. OXLEY, Mr. TIBERI, Mr. OSE, and Mrs. KELLY)

introduced the following bill; which was referred to the Committee on Financial Services

A BILL

To enhance the authority of the Securities and Exchange

Commission to investigate, punish, and deter securities

laws violations, and to improve its ability to return funds

to defrauded investors, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘The Securities Fraud

5 Deterrence and Investor Restitution Act of 2003’’.
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1 SEC. 2. RECOVERY BY COMMISSION OF SECURITIES LAW

2 JUDGMENTS.

3 Title III of the Sarbanes-Oxley Act of 2002 is amend4 ed by adding after section 308 (15 U.S.C. 7246) the fol5 lowing new section:

6 ‘‘SEC. 309. RECOVERY OF SECURITIES LAW JUDGMENTS;

7 REMOVAL OF STATE LAW IMPEDIMENTS.

8 ‘‘If in any judicial or administrative action brought

9 by the Commission under the securities laws the Commis10 sion obtains a judgment or order (either by litigation or

11 settlement) against any person based upon an alleged

12 fraudulent, deceptive, or manipulative act or practice in

13 violation of such laws or the rules or regulations there14 under, the Commission may obtain the foreclosure and

15 forced sale of any property owned in whole or in part by

16 that person, or by any person to whom such ownership

17 was transferred without adequate consideration, to satisfy

18 that judgment or order in a Federal or State court not19 withstanding any homestead provision of any State con20 stitution or any other State law that exempts or protects

21 property from either foreclosure and forced sale under any

22 process of court or from any lien thereon for the payment

23 of debts.’’.

24 SEC. 3. CIVIL ENFORCEMENT PROVISIONS.

25 (a) AUTHORITY TO IMPOSE CIVIL PENALTIES IN

26 CEASE AND DESIST PROCEEDINGS.—
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1 (1) UNDER THE SECURITIES ACT OF 1933.—

2 Section 8A of the Securities Act of 1933 (15 U.S.C.

3 77h–1) is amended by adding at the end the fol4 lowing new subsection:

5 ‘‘(g) AUTHORITY TO IMPOSE MONEY PENALTIES.—

6 ‘‘(1) GROUNDS FOR IMPOSING.—In any cease7 and-desist proceeding under subsection (a), the

8 Commission may impose a civil penalty on a person

9 if it finds, on the record after notice and opportunity

10 for hearing, that—

11 ‘‘(A) such person—

12 ‘‘(i) is violating or has violated any

13 provision of this title, or any rule or regu14 lation thereunder; or

15 ‘‘(ii) is or was a cause of the violation

16 of any provision of this title, or any rule or

17 regulation thereunder; and

18 ‘‘(B) such penalty is in the public interest.

19 ‘‘(2) MAXIMUM AMOUNT OF PENALTY.—

20 ‘‘(A) FIRST TIER.—The maximum amount

21 of penalty for each act or omission described in

22 subsection (1) shall be $100,000 for a natural

23 person or $250,000 for any other person.

24 ‘‘(B) SECOND TIER.—Notwithstanding

25 paragraph (A), the maximum amount of pen-
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1 alty for each such act or omission shall be

2 $500,000 for a natural person or $1,000,000

3 for any other person if the act or omission de4 scribed in subsection (1) involved fraud, deceit,

5 manipulation, or deliberate or reckless dis6 regard of a regulatory requirement.

7 ‘‘(C) THIRD TIER.—Notwithstanding para8 graphs (A) and (B), the maximum amount of

9 penalty for each such act or omission shall be

10 $1,000,000 for a natural person or $2,000,000

11 for any other person if—

12 ‘‘(i) the act or omission described in

13 subsection (1) involved fraud, deceit, ma14 nipulation, or deliberate or reckless dis15 regard of a regulatory requirement; and

16 ‘‘(ii) such act or omission directly or

17 indirectly resulted in substantial losses or

18 created a significant risk of substantial

19 losses to other persons or resulted in sub20 stantial pecuniary gain to the person who

21 committed the act or omission.

22 ‘‘(3) EVIDENCE CONCERNING ABILITY TO

23 PAY.—In any proceeding in which the Commission

24 may impose a penalty under this section, a respond25 ent may present evidence of the respondent’s ability
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1 to pay such penalty. The Commission may, in its

2 discretion, consider such evidence in determining

3 whether such penalty is in the public interest. Such

4 evidence may relate to the extent of such person’s

5 ability to continue in business and the collectability

6 of a penalty, taking into account any other claims of

7 the United States or third parties upon such per8 son’s assets and the amount of such person’s as9 sets.’’.

10 (2) UNDER THE SECURITIES EXCHANGE ACT

11 OF 1934.—Subsection (a) of section 21B of the Secu12 rities Exchange Act of 1934 (15 U.S.C. 78u–2(a))

13 is amended—

14 (A) by striking ‘‘(a) COMMISSION AUTHOR15 ITY TO ASSESS MONEY PENALTIES.—In any

16 proceeding’’ and inserting the following:

17 ‘‘(a) COMMISSION AUTHORITY TO ASSESS MONEY

18 PENALTIES.—

19 ‘‘(1) IN GENERAL.—In any proceeding’’;

20 (B) by redesignating paragraphs (1)

21 through (4) of such subsection as subpara22 graphs (A) through (D), respectively; and

23 (C) by adding at the end of such sub24 section the following new paragraph:
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1 ‘‘(2) CEASE-AND-DESIST PROCEEDINGS.—In

2 any proceeding instituted pursuant to section 21C of

3 this title against any person, the Commission may

4 impose a civil penalty if it finds, on the record after

5 notice and opportunity for hearing, that such

6 person—

7 ‘‘(A) is violating or has violated any provi8 sion of this title, or any rule or regulation

9 thereunder; or

10 ‘‘(B) is or was a cause of the violation of

11 any provision of this title, or any rule or regula12 tion thereunder.’’.

13 (3) UNDER THE INVESTMENT COMPANY ACT OF

14 1940.—Paragraph (1) of section 9(d) of the Invest15 ment Company Act of 1940 (15 U.S.C. 80a–

16 9(d)(1))) is amended—

17 (A) by striking ‘‘(1) AUTHORITY OF COM18 MISSION.—In any proceeding’’ and inserting the

19 following:

20 ‘‘(1) AUTHORITY OF COMMISSION.—

21 ‘‘(A) IN GENERAL.—In any proceeding’’;

22 (B) by redesignating subparagraphs (A)

23 through (D) of such paragraph as clauses (i)

24 through (iv), respectively; and
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1 (C) by adding at the end of such para2 graph the following new subparagraph:

3 ‘‘(B) CEASE-AND-DESIST PROCEEDINGS.—

4 In any proceeding instituted pursuant to sub5 section (f) against any person, the Commission

6 may impose a civil penalty if it finds, on the

7 record after notice and opportunity for hearing,

8 that such person—

9 ‘‘(i) is violating or has violated any

10 provision of this title, or any rule or regu11 lation thereunder; or

12 ‘‘(ii) is or was a cause of the violation

13 of any provision of this title, or any rule or

14 regulation thereunder.’’.

15 (4) UNDER THE INVESTMENT ADVISERS ACT OF

16 1940.—Paragraph (1) of section 203(i) of the Invest17 ment Advisers Act of 1940 (15 U.S.C. 80b–3(i)(1))

18 is amended—

19 (A) by striking ‘‘(1) AUTHORITY OF COM20 MISSION.—In any proceeding’’ and inserting the

21 following:

22 ‘‘(1) AUTHORITY OF COMMISSION.—

23 ‘‘(A) IN GENERAL.—In any proceeding’’;
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1 (B) by redesignating subparagraphs (A)

2 through (D) of such paragraph as clauses (i)

3 through (iv), respectively; and

4 (C) by adding at the end of such para5 graph the following new subparagraph:

6 ‘‘(B) CEASE-AND-DESIST PROCEEDINGS.—

7 In any proceeding instituted pursuant to sub8 section (k) against any person, the Commission

9 may impose a civil penalty if it finds, on the

10 record after notice and opportunity for hearing,

11 that such person—

12 ‘‘(i) is violating or has violated any

13 provision of this title, or any rule or regu14 lation thereunder; or

15 ‘‘(ii) is or was a cause of the violation

16 of any provision of this title, or any rule or

17 regulation thereunder.’’.

18 (b) INCREASED MAXIMUM CIVIL MONEY PEN19 ALTIES.—

20 (1) SECURITIES ACT OF 1933.—Section 20(d)(2)

21 of the Securities Act of 1933 (15 U.S.C. 77t(d)(2))

22 is amended—

23 (A) in subparagraph (A)(i)—

24 (i) by striking ‘‘$5,000’’ and inserting

25 ‘‘$100,000’’; and
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1 (ii) by striking ‘‘$50,000’’ and insert2 ing ‘‘$250,000’’;

3 (B) in subparagraph (B)(i)—

4 (i) by striking ‘‘$50,000’’ and insert5 ing ‘‘$500,000’’; and

6 (ii) by striking ‘‘$250,000’’ and in7 serting ‘‘$1,000,000’’; and

8 (C) in subparagraph (C)(i)—

9 (i) by striking ‘‘$100,000’’ and insert10 ing ‘‘$1,000,000’’; and

11 (ii) by striking ‘‘$500,000’’ and in12 serting ‘‘$2,000,000’’.

13 (2) SECURITIES EXCHANGE ACT OF 1934.—

14 (A) PENALTIES.—Section 32 of the Securi15 ties Exchange Act of 1934 (15 U.S.C. 78ff) is

16 amended—

17 (i) in subsection (b), by striking

18 ‘‘$100’’ and inserting ‘‘$10,000’’; and

19 (ii) in subsection (c)—

20 (I) in paragraph (1)(B), by strik21 ing ‘‘$10,000’’ and inserting

22 ‘‘$500,000’’; and

23 (II) in paragraph (2)(B), by

24 striking ‘‘$10,000’’ and inserting

25 ‘‘$500,000’’.
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1 (B) INSIDER TRADING.—Section 21A(a)(3)

2 of the Securities Exchange Act of 1934 (15

3 U.S.C. 78u–1(a)(3)) is amended by striking

4 ‘‘$1,000,000’’ and inserting ‘‘$2,000,000’’.

5 (C) ADMINISTRATIVE PROCEEDINGS.—Sec6 tion 21B(b) of the Securities Exchange Act of

7 1934 (15 U.S.C. 78u–2(b)) is amended—

8 (i) in paragraph (1)—

9 (I) by striking ‘‘$5,000’’ and in10 serting ‘‘$100,000’’; and

11 (II) by striking ‘‘$50,000’’ and

12 inserting ‘‘$250,000’’;

13 (ii) in paragraph (2)—

14 (I) by striking ‘‘$50,000’’ and in15 serting ‘‘$500,000’’; and

16 (II) by striking ‘‘$250,000’’ and

17 inserting ‘‘$1,000,000’’; and

18 (iii) in paragraph (3)—

19 (I) by striking ‘‘$100,000’’ and

20 inserting ‘‘$1,000,000’’; and

21 (II) by striking ‘‘$500,000’’ and

22 inserting ‘‘$2,000,000’’.

23 (D) CIVIL ACTIONS.—Section 21(d)(3)(B)

24 of the Securities Exchange Act of 1934 (15

25 U.S.C. 78u(d)(3)(B)) is amended—
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1 (i) in clause (i)—

2 (I) by striking ‘‘$5,000’’ and in3 serting ‘‘$100,000’’; and

4 (II) by striking ‘‘$50,000’’ and

5 inserting ‘‘$250,000’’;

6 (ii) in clause (ii)—

7 (I) by striking ‘‘$50,000’’ and in8 serting ‘‘$500,000’’; and

9 (II) by striking ‘‘$250,000’’ and

10 inserting ‘‘$1,000,000’’; and

11 (iii) in clause (iii)—

12 (I) by striking ‘‘$100,000’’ and

13 inserting ‘‘$1,000,000’’; and

14 (II) by striking ‘‘$500,000’’ and

15 inserting ‘‘$2,000,000’’.

16 (3) INVESTMENT COMPANY ACT OF 1940.—

17 (A) INELIGIBILITY.—Section 9(d)(2) of the

18 Investment Company Act of 1940 (15 U.S.C.

19 80a–9(d)(2)) is amended—

20 (i) in subparagraph (A)—

21 (I) by striking ‘‘$5,000’’ and in22 serting ‘‘$100,000’’; and

23 (II) by striking ‘‘$50,000’’ and

24 inserting ‘‘$250,000’’;

25 (ii) in subparagraph (B)—
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1 (I) by striking ‘‘$50,000’’ and in2 serting ‘‘$500,000’’; and

3 (II) by striking ‘‘$250,000’’ and

4 inserting ‘‘$1,000,000’’; and

5 (iii) in subparagraph (C)—

6 (I) by striking ‘‘$100,000’’ and

7 inserting ‘‘$1,000,000’’; and

8 (II) by striking ‘‘$500,000’’ and

9 inserting ‘‘$2,000,000’’.

10 (B) ENFORCEMENT OF INVESTMENT COM11 PANY ACT.—Section 42(e)(2) of the Investment

12 Company Act of 1940 (15 U.S.C. 80a–

13 41(e)(2)) is amended—

14 (i) in subparagraph (A)—

15 (I) by striking ‘‘$5,000’’ and in16 serting ‘‘$100,000’’; and

17 (II) by striking ‘‘$50,000’’ and

18 inserting ‘‘$250,000’’;

19 (ii) in subparagraph (B)—

20 (I) by striking ‘‘$50,000’’ and in21 serting ‘‘$500,000’’; and

22 (II) by striking ‘‘$250,000’’ and

23 inserting ‘‘$1,000,000’’; and

24 (iii) in subparagraph (C)—
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1 (I) by striking ‘‘$100,000’’ and

2 inserting ‘‘$1,000,000’’; and

3 (II) by striking ‘‘$500,000’’ and

4 inserting ‘‘$2,000,000’’.

5 (4) INVESTMENT ADVISERS ACT OF 1940.—

6 (A) REGISTRATION.—Section 203(i)(2) of

7 the Investment advisers Act of 1940 (15 U.S.C.

8 80b–3(i)(2)) is amended—

9 (i) in subparagraph (A)—

10 (I) by striking ‘‘$5,000’’ and in11 serting ‘‘$100,000’’; and

12 (II) by striking ‘‘$50,000’’ and

13 inserting ‘‘$250,000’’;

14 (ii) in subparagraph (B)—

15 (I) by striking ‘‘$50,000’’ and in16 serting ‘‘$500,000’’; and

17 (II) by striking ‘‘$250,000’’ and

18 inserting ‘‘$1,000,000’’; and

19 (iii) in subparagraph (C)—

20 (I) by striking ‘‘$100,000’’ and

21 inserting ‘‘$1,000,000’’; and

22 (II) by striking ‘‘$500,000’’ and

23 inserting ‘‘$2,000,000’’.

24 (B) ENFORCEMENT OF INVESTMENT AD25 VISERS ACT.—Section 209(e)(2) of the Invest-
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1 ment advisers Act of 1940 (15 U.S.C. 80b–

2 9(e)(2)) is amended—

3 (i) in subparagraph (A)—

4 (I) by striking ‘‘$5,000’’ and in5 serting ‘‘$100,000’’; and

6 (II) by striking ‘‘$50,000’’ and

7 inserting ‘‘$250,000’’;

8 (ii) in subparagraph (B)—

9 (I) by striking ‘‘$50,000’’ and in10 serting ‘‘$500,000’’; and

11 (II) by striking ‘‘$250,000’’ and

12 inserting ‘‘$1,000,000’’; and

13 (iii) in subparagraph (C)—

14 (I) by striking ‘‘$100,000’’ and

15 inserting ‘‘$1,000,000’’; and

16 (II) by striking ‘‘$500,000’’ and

17 inserting ‘‘$2,000,000’’.

18 (c) AUTHORITY TO OBTAIN FINANCIAL RECORDS.—

19 Section 21(h) of the Securities Exchange Act of 1934 (15

20 U.S.C. 78u(h)) is amended—

21 (1) by striking paragraphs (2) through (8);

22 (2) in paragraph (9), by striking ‘‘(9)(A)’’ and

23 all that follows through ‘‘(B) The’’ and inserting

24 ‘‘(3) The’’;
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1 (3) by inserting after paragraph (1), the fol2 lowing:

3 ‘‘(2) ACCESS TO FINANCIAL RECORDS.—

4 ‘‘(A) IN GENERAL.—Notwithstanding sec5 tion 1105 or 1107 of the Right to Financial

6 Privacy Act of 1978, the Commission may ob7 tain access to and copies of, or the information

8 contained in, financial records of any person

9 held by a financial institution, including the fi10 nancial records of a customer, without notice to

11 that person, when it acts pursuant to a sub12 poena authorized by a formal order of investiga13 tion of the Commission and issued under the

14 securities laws or pursuant to an administrative

15 or judicial subpoena issued in a proceeding or

16 action to enforce the securities laws.

17 ‘‘(B) NONDISCLOSURE OF REQUESTS.—If

18 the Commission so directs in its subpoena, no

19 financial institution, or officer, director, part20 ner, employee, shareholder, representative or

21 agent of such financial institution, shall, di22 rectly or indirectly, disclose that records have

23 been requested or provided in accordance with

24 subparagraph (A), if the Commission finds rea25 son to believe that such disclosure may—
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1 ‘‘(i) result in the transfer of assets or

2 records outside the territorial limits of the

3 United States;

4 ‘‘(ii) result in improper conversion of

5 investor assets;

6 ‘‘(iii) impede the ability of the Com7 mission to identify, trace, or freeze funds

8 involved in any securities transaction;

9 ‘‘(iv) endanger the life or physical

10 safety of an individual;

11 ‘‘(v) result in flight from prosecution;

12 ‘‘(vi) result in destruction of or tam13 pering with evidence;

14 ‘‘(vii) result in intimidation of poten15 tial witnesses; or

16 ‘‘(viii) otherwise seriously jeopardize

17 an investigation or unduly delay a trial.

18 ‘‘(C) TRANSFER OF RECORDS TO GOVERN19 MENT AUTHORITIES.—The Commission may

20 transfer financial records or the information

21 contained therein to any government authority,

22 if the Commission proceeds as a transferring

23 agency in accordance with section 1112 of the

24 Right to Financial Privacy Act of 1978 (12

25 U.S.C. 3412), except that a customer notice
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1 shall not be required under subsection (b) or (c)

2 of that section 1112, if the Commission deter3 mines that there is reason to believe that such

4 notification may result in or lead to any of the

5 factors identified under clauses (i) through

6 (viii) of subparagraph (B) of this paragraph.’’;

7 (4) by striking paragraph (10); and

8 (5) by redesignating paragraphs (11), (12), and

9 (13) as paragraphs (4), (5), and (6), respectively.

10 SEC. 4. AUTHORITY TO ACCEPT PRIVILEGED AND PRO11 TECTED INFORMATION.

12 Section 24 of the Securities Exchange Act of 1934

13 (15 U.S.C. 78x) is amended—

14 (1) by redesignating subsection (e) as sub15 section (f); and

16 (2) by inserting after subsection (d) the fol17 lowing new subsection:

18 ‘‘(e) AUTHORITY TO ACCEPT PRIVILEGED AND PRO19 TECTED INFORMATION.—Notwithstanding any other pro20 vision of law, whenever the Commission and any person

21 agree in writing to terms pursuant to which such person

22 will produce or disclose to the Commission any document

23 or information that is subject to any Federal or State law

24 privilege, or to the protection provided by the work prod25 uct doctrine, such production or disclosure shall not con-
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1 stitute a waiver of the privilege or protection as to any

2 person other than the Commission.’’.

3 SEC. 5. ACCESS TO GRAND JURY INFORMATION.

4 Title VI of the Sarbanes-Oxley Act of 2002 is amend5 ed by adding at the end thereof the following new section:

6 ‘‘SEC. 605. ACCESS TO GRAND JURY INFORMATION.

7 ‘‘(a) DISCLOSURE OF CERTAIN MATTERS OCCUR8 RING BEFORE GRAND JURY FOR USE IN ENFORCING SE9 CURITIES LAWS.—

10 ‘‘(1) IN GENERAL.—Upon motion of an attor11 ney for the government, a court may direct disclo12 sure of matters occurring before a grand jury during

13 an investigation of conduct that may constitute a

14 violation of any provision of the securities laws to

15 identified personnel of the Commission for use in re16 lation to any matter within the jurisdiction of the

17 Commission.

18 ‘‘(2) FINDING OF SUBSTANTIAL NEED RE19 QUIRED.—A court may issue an order under para20 graph (1) only upon a finding of a substantial need

21 in the public interest.

22 ‘‘(b) RESTRICTED USE OF INFORMATION.—A person

23 to whom a matter has been disclosed under this section

24 shall not use such matter other than for the purpose for

25 which such disclosure was authorized.
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1 ‘‘(c) DEFINITION.—As used in this section, the terms

2 ‘attorney for the government’ and ‘grand jury information’

3 have the meanings given to those terms in section 3322

4 of title 18, United States Code.’’.

5 SEC. 6. NATIONWIDE SERVICE OF PROCESS.

6 (a) SECURITIES ACT OF 1933.—Section 22(a) of the

7 Securities Act of 1933 (15 U.S.C. 77v(a)) is amended by

8 inserting after the second sentence the following: ‘‘In any

9 action or proceeding instituted by the Commission under

10 this title in a United States district court for any judicial

11 district, subpoenas issued by or on behalf of such court

12 to compel the attendance of witnesses or the production

13 of documents or tangible things (or both) may be served

14 in any other district. Such subpoenas may be served and

15 enforced without application to the court or a showing of

16 cause, notwithstanding the provisions of rule 45(b)(2),

17 (c)(3)(A)(ii), and (c)(3)(B)(iii) of the Federal Rules of

18 Civil Procedure.’’.

19 (b) SECURITIES EXCHANGE ACT OF 1934.—Section

20 27 of the Securities Exchange Act of 1934 (15 U.S.C.

21 78aa) is amended by inserting after the second sentence

22 the following: ‘‘In any action or proceeding instituted by

23 the Commission under this title in a United States district

24 court for any judicial district, subpoenas issued by or on

25 behalf of such court to compel the attendance of witnesses
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1 or the production of documents or tangible things (or

2 both) may be served in any other district. Such subpoenas

3 may be served and enforced without application to the

4 court or a showing of cause, notwithstanding the provi5 sions of rule 45(b)(2), (c)(3)(A)(ii), and (c)(3)(B)(iii) of

6 the Federal Rules of Civil Procedure.’’.

7 (c) INVESTMENT COMPANY ACT OF 1940.—Section

8 44 of the Investment Company Act of 1940 (15 U.S.C.

9 80a–43) is amended by inserting after the fourth sentence

10 the following: ‘‘In any action or proceeding instituted by

11 the Commission under this title in a United States district

12 court for any judicial district, subpoenas issued by or on

13 behalf of such court to compel the attendance of witnesses

14 or the production of documents or tangible things (or

15 both) may be served in any other district. Such subpoenas

16 may be served and enforced without application to the

17 court or a showing of cause, notwithstanding the provi18 sions of rule 45(b)(2), (c)(3)(A)(ii), and (c)(3)(B)(iii) of

19 the Federal Rules of Civil Procedure.’’.

20 (d) INVESTMENT ADVISERS ACT OF 1940.—Section

21 214 of the Investment Advisers Act of 1940 (15 U.S.C.

22 80b–14) is amended by inserting after the third sentence

23 the following: ‘‘In any action or proceeding instituted by

24 the Commission under this title in a United States district

25 court for any judicial district, subpoenas issued by or on
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1 behalf of such court to compel the attendance of witnesses

2 or the production of documents or tangible things (or

3 both) may be served in any other district. Such subpoenas

4 may be served and enforced without application to the

5 court or a showing of cause, notwithstanding the provi6 sions of rule 45(b)(2), (c)(3)(A)(ii), and (c)(3)(B)(iii) of

7 the Federal Rules of Civil Procedure.’’.

8 SEC. 7. AUTHORITY TO CONTRACT WITH PRIVATE COUN9 SEL FOR LEGAL SERVICES TO COLLECT DE10 LINQUENT JUDGMENTS AND ORDERS.

11 Subsection (b) of section 4 of the Securities Exchange

12 Act of 1934 (15 U.S.C. 78d(b)) is amended—

13 (1) in the subsection heading by striking ‘‘AND

14 LEASING AUTHORITY.—’’ and inserting ‘‘, LEASING

15 AUTHORITY, AND CONTRACTING AUTHORITY.—’’;

16 and

17 (2) by adding at the end of such subsection the

18 following new paragraph:

19 ‘‘(4) CONTRACTING AUTHORITY.—

20 ‘‘(A) IN GENERAL.—Notwithstanding any

21 other provision of law, the Commission is au22 thorized to enter into contracts to retain private

23 legal counsel to furnish legal services, including

24 representation in litigation, negotiation, com25 promise, and settlement, in the case of any
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1 claim of indebtedness resulting from any judg2 ment or order (either by litigation or settle3 ment) obtained by the Commission in any judi4 cial action or administrative proceeding brought

5 by or on behalf of the Commission. Private

6 counsel retained under this paragraph may rep7 resent the Commission in such debt collection

8 matters to the same extent as the Commission

9 may represent itself.

10 ‘‘(B) TERMS AND CONDITIONS OF CON11 TRACT.—Each such contract shall include such

12 terms and conditions as the Commission con13 siders necessary and appropriate, and shall in14 clude provisions specifying—

15 ‘‘(i) the amount of the fee to be paid

16 to the private counsel under such contract

17 or the method for calculating that fee;

18 ‘‘(ii) that the Commission retains the

19 authority to represent itself, resolve a dis20 pute, compromise a claim, end collection

21 efforts, and refer a matter to other private

22 counsel or to the Attorney General; and

23 ‘‘(iii) that the Commission may termi24 nate either the contract or the private

25 counsel’s representation of the Commission
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1 in particular cases for any reason, includ2 ing for the convenience of the Commission.

3 ‘‘(C) PAYMENT OF FEES.—Notwith4 standing section 3302(b) of title 31, United

5 States Code, a contract under this paragraph

6 may provide that fees and costs incurred by pri7 vate counsel under such contracts are payable

8 from the amounts recovered.

9 ‘‘(D) COMPETITION REQUIREMENTS.—

10 Nothing in this paragraph shall relieve the

11 Commission of the competition requirements set

12 forth in title III of the Federal Property and

13 Administrative Services Act of 1949 (41 U.S.C.

14 251 et seq.).

15 ‘‘(E) COUNTERCLAIMS.—In any action to

16 recover indebtedness which is brought on behalf

17 of the Commission by private counsel retained

18 under this paragraph, no counterclaim may be

19 asserted against the Commission unless the

20 counterclaim is served directly on the Commis21 sion. Such service shall be made in accordance

22 with the rules of procedure of the court in

23 which the action is brought.’’.
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1 SEC. 8. FAIR ACT AMENDMENTS.

2 (a) CIVIL PENALTIES.—Section 308(a) of the Sar3 banes-Oxley Act of 2002 (15 U.S.C. 7246(a)) is amended

4 to read as follows;

5 ‘‘(a) CIVIL PENALTIES TO BE USED FOR THE RE6 LIEF OF VICTIMS.—If in any judicial or administrative ac7 tion brought by the Commission under the securities laws

8 (as such term is defined in section 3(a)(47) of the Securi9 ties Exchange Act of 1934 (15 U.S.C. 78c(a)(47))) the

10 Commission obtains pursuant to such laws a civil penalty

11 against any person, such civil penalty monies shall, on the

12 motion or at the direction of the Commission, be added

13 to and become part of a fund for the benefit of the victims

14 of such violation.’’.

15 (b) ADDITIONAL PROVISIONS.—Section 308 of the

16 Sarbanes-Oxley Act of 2002 (15 U.S.C. 7246) is further

17 amended—

18 (1) by redesignation subsections (c), (d), and

19 (e) as subsections (e), (f), and (g), respectively; and

20 (2) by inserting the following after subsection

21 (b):

22 ‘‘(c) CIVIL PENALTIES AND DISGORGEMENT FUNDS

23 IN ACTIONS BROUGHT BY STATES.—If a State or political

24 subdivision of a State establishes, as a result of an agree25 ment or judgment obtained by such State or political sub26 division, any requirements for brokers or dealers (includ-
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•HR 2179 IH

1 ing government securities brokers and dealers) relating to

2 capital, custody, margin, financial responsibility, record3 keeping, bonding, or financial or operational reporting or

4 disclosure that differ from or are in addition to the re5 quirements in those areas established under the securities

6 laws (as such term is defined in section 3(a)(47) of the

7 Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(47))),

8 or by the Commission or by any national securities ex9 change or self-regulatory organization under such laws,

10 and such agreement or judgment includes civil penalties

11 or an order requiring disgorgement, the amount of such

12 penalty or disgorgement shall be remitted to the Commis13 sion for distribution in accordance with subsection (a).

14 ‘‘(d) UNDISTRIBUTED FUNDS TO BE USED FOR IN15 VESTOR EDUCATION.—In any judicial or administrative

16 action in which a fund is created pursuant to subsection

17 (a) or in which the Commission had obtained

18 disgorgement, if the Commission determines (due to the

19 size of the fund to be distributed, the number of investors,

20 the nature of the underlying violation, or for other rea21 sons) that it would be infeasible to distribute such fund

22 or disgorgement to the victims of the violation, or if after

23 distribution of the fund or disgorgement to victims there

24 are excess monies remaining, the Commission may move

25 for an order in a judicial action, or may issue an order
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1 in an administrative proceeding, requiring that the undis2 tributed amount of the fund or disgorgement be used for

3 investor education programs administered by an estab4 lished not-for-profit or governmental organization whose

5 purposes include investor education and financial lit6 eracy.’’.

Æ