Despite opposition, the House Financial Services Committee approved a bill introduced by Rep. Scott Garrett (R.-N.J.) that seeks to allow companies to opt out of the Securities and Exchange Commission’s current enforcement proceedings.
“I’m pleased that today the Financial Services Committee passed my bill to restore the due process rights of all Americans by allowing them to have their case before the SEC heard by a federal court. I’m also happy to announce that my bill to allow Main Street businesses to raise capital by accessing public markets passed the committee,” explained Garrett in a statement late Wednesday.
According to Garrett, HR 3798, the Due Process Restoration Act, would provide a mandatory right of removal allowing the defendant to request that the case be moved to a district court rather than having it dealt with by an SEC panel and would raise the burden of proof for some cases to a “clear and convincing evidence” standard.
Garrett, who chairs the Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, introduced the bill in December. It now moves to the full House of Representatives.
Members of the committee worked on the text of this bill and nine others on Wednesday. As that markup process got underway, Rep. Maxine Waters, D.-Calif., pressed lawmakers not to weaken investor protections.
“The American people — on a strong, bipartisan basis – broadly favor efforts to properly regulate the financial services sector,” Waters said in her opening remarks. “When we use this committee to advance the needs of special interests, rather than the interests of working people, we squander the trust of the public and fail in our obligation to protect the least of these.”
Also on Wednesday, Americans for Financial Reform wrote to House members in opposition to HR 3798.
“Contrary to its sponsor’s stated goal of ‘restor[ing] due process rights for all Americans,’ this bill would reinforce a two-tiered justice system. HR 3798 would make it more difficult for the Securities and Exchange Commission (SEC) to hold companies accountable when they break the law — even as those same firms frequently deny basic due process to their investors and customers through forced arbitration,” it explained in a letter.
The group, which includes some 200 national, state and local organizations, objects to the bill’s main objective, which is to “allow respondents in SEC administrative proceedings to unilaterally terminate those proceedings, leaving the SEC to either re-file in federal court or drop the charges,” it explained.
Such a measure would “significantly raise the burden of proof in administrative proceedings to require the SEC show clear and convincing evidence that the company violated the law – a significantly greater burden than the civil standard of a preponderance of the evidence,” the group adds.