A bill to amend the Securities Exchange Act of 1934 and the Securities Act of 1933, to address liability standards in connection with violations of the Federal securities laws, and for other purposes.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Investor Protection Act of 2002''.

SEC. 2. LIABILITY STANDARDS IN PRIVATE SECURITIES LITIGATION.

    (a) In General.--Section 21D(f) of the Securities Exchange Act of 
1934 (15 U.S.C. 78u-4(f)) is amended to read as follows:
    ``(f) Civil Liability.--
            ``(1) Joint and several liability for damages.--Any covered 
        person against whom a final judgment is entered in a private 
        action arising under this title shall be liable for damages 
        jointly and severally.
            ``(2) Settlement discharge.--
                    ``(A) In general.--A covered person who settles any 
                private action arising under this title at any time 
                before final verdict or judgment shall be discharged 
                from all claims for contribution brought by other 
                persons.
                    ``(B) Bar order.--Upon entry of a settlement 
                described in subparagraph (A) by the court, the court 
                shall enter a bar order constituting the final 
                discharge of all obligations to the plaintiff of the 
                settling covered person arising out of the action, 
                which order shall bar all future claims for 
                contribution arising out of the action--
                            ``(i) by any person against the settling 
                        covered person; and
                            ``(ii) by the settling covered person 
                        against any person, other than a person whose 
                        liability has been extinguished by the 
                        settlement of the settling covered person.
                    ``(C) Reduction.--If a covered person enters into a 
                settlement with the plaintiff prior to final verdict or 
                judgment, the verdict or judgment shall be reduced by 
                the greater of--
                            ``(i) an amount that corresponds to the 
                        percentage of responsibility of that covered 
                        person; or
                            ``(ii) the amount paid to the plaintiff by 
                        that covered person.
            ``(3) Contribution.--
                    ``(A) In general.--A covered person who is jointly 
                and severally liable for damages in any private action 
                arising under this title may recover contribution from 
                any other person who, if joined in the original action, 
                would have been liable for the same damages. A claim 
                for contribution shall be determined based on the 
                percentage of responsibility of the claimant and of 
                each person against whom a claim for contribution is 
                made, as determined by the court.
                    ``(B) Statute of limitations for contribution.--In 
                any private action arising out of this title 
                determining liability, an action for contribution shall 
                be brought not later than 6 months after the date of 
                entry of a final, nonappealable judgment in the action.
            ``(4) Applicability.--Nothing in this subsection shall be 
        construed to create, affect, or in any manner modify, the 
        standard for liability associated with any action arising under 
        the securities laws.
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) the term `covered person' means--
                            ``(i) a defendant in any private action 
                        arising under this title; or
                            ``(ii) a defendant in any private action 
                        arising under section 11 of the Securities Act 
                        of 1933, who is an outside director of the 
                        issuer of the securities that are the subject 
                        of the action; and
                    ``(B) the term `outside director' shall have the 
                meaning given such term by rule or regulation of the 
                Commission.''.
    (b) Conforming Amendment to the Securities Act of 1933.--Section 
11(f)(2)(A) of the Securities Act of 1933 (15 U.S.C. 77k(f)(2)(A)) is 
amended by striking ``in accordance'' and all that follows through the 
period and inserting ``in accordance with section 21D(f) of the 
Securities Exchange Act of 1934.''.
    (c) Applicability.--The amendments made by this section shall not 
affect or apply to any private action arising under the securities laws 
commenced before and pending on the date of enactment of this Act.

SEC. 3. PERSONS WHO AID AND ABET VIOLATIONS.

    (a) Commission Authority.--Section 20(e) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78t(e)) is amended by striking ``knowingly'' and 
inserting ``recklessly''.
    (b) Private Litigation.--Section 21D of the Securities Exchange Act 
of 1934 (15 U.S.C. 78u-4) is amended by adding at the end the 
following:
    ``(g) Persons That Aid or Abet Violations.--Any person that 
recklessly provides substantial assistance to another person in 
violation of a provision of this title, or of any rule or regulation 
issued under this title, shall be deemed to be in violation of such 
provision to the same extent as the person to whom such assistance is 
provided.''.

SEC. 4. STATUTE OF LIMITATIONS.

    Title I of the Securities Exchange Act of 1934 (15 U.S.C. 78a et 
seq.) is amended by adding at the end the following new section:

``SEC. 37. STATUTE OF LIMITATIONS.

    ``(a) In General.--Except as otherwise specifically provided in 
this title, and notwithstanding section 9(e), an implied private right 
of action arising under this title may be brought not later than the 
earlier of--
            ``(1) 5 years after the date on which the alleged violation 
        occurred; or
            ``(2) 3 years after the date on which the alleged violation 
        was discovered.
    ``(b) Effective Date.--The limitations period provided by this 
section shall apply to all proceedings commenced after the date of 
enactment of the Investor Protection Act of 2002.''.

SEC. 5. REPEAL OF CERTAIN CLASS ACTION LIMITATIONS.

    (a) Securities Exchange Act of 1934.--Section 28 of the Securities 
Exchange Act of 1934 (15 U.S.C. 78bb) is amended--
            (1) in subsection (a), by striking ``Except as provided in 
        subsection (f), the'' and inserting ``The''; and
            (2) by striking subsection (f).
    (b) Securities Act of 1933.--Section 16 of the Securities Act of 
1933 (15 U.S.C. 77p) is amended to read as follows:

``SEC. 16. REMEDIES ADDITIONAL.

    ``The rights and remedies provided by this title shall be in 
addition to any and all other rights and remedies that may exist at law 
or in equity.''.

Summary: Investor Protection Act of 2002 - Amends the Securities Exchange Act of 1934 regarding liability standards in private securities litigation to repeal: (1) the scienter requirement limiting joint and several liability for damages to covered persons who knowingly committed a violation of the securities laws; and (2) the allowance of proportionate liability, under which a covered person is liable solely for the portion of a judgment that corresponds to the person's percentage of responsibility for a securities violation. (Thus makes any covered person against whom a final judgment is entered in private securities litigation liable for one hundred percent of damages jointly and severally, even if the securities violation was not committed knowingly.)Deems any person that recklessly provides substantial assistance to (aids or abets) another person in violation of Federal securities laws to be in violation of such laws to the same extent as the person to whom such assistance is provided.Establishes a statute of limitations for an implied private right of action of: (1) five years after an alleged violation occurred; or (2) three years after it was discovered.Repeals the prohibition against all but specified types of private class actions alleging either misrepresentation or omission of a material fact or manipulative or deceptive practices in connection with securities sales or purchases (thus permitting private class actions without limitation).