On March 14, 2019, Senators Mark R. Warner, a Democrat from Virginia and John Kennedy, a Republican from Louisiana, introduced the Securities Fraud Enforcement and Investor Compensation Act, a bipartisan bill that would empower the U.S. Securities and Exchange Commission (“SEC”) to seek restitution for investors harmed by securities fraud. Many investors do not realize that under current law, the SEC often does not have the ability to make investors whole, because it is only authorized to seek disgorgement of profits from wrongdoers, not restitution of the full amount of damages that they inflict upon investors.
Under current law, even where ecurities fraud causes substantial losses to investors, the SEC’s current power to obtain monetary relief is limited to the greater of $500,000 or the gross amount of pecuniary gain to the fraudster. These limits applly no matter how many investors are harmed and no matter how great the harm inflicted. Quite often, the harm caused by securities fraud far exceeds the benefit obtained by the wrongdoer and, therefore, the remedies available to the SEC are inadquate to make investors whole.
In order for investors to be made whole, they generally must hire their own attorneys to pursue private securities arbitration or litigation if the investor wants to be made whole. The bill introduced by Senators Warner and Kennedy would expand the SEC’s power to allow it to seek to recover actual damages sustained by investors as a result of fraud. However, even if this bill were to become law, it would still be important for investors to consult with a private attorney to evaluate what rights they may have under state and federal law. State law often provides victims of fraud with greater remedies than federal law. Moreover, pursuing private securities arbitration generally does not preclude an investor from also participating in a regulatory recovery by the SEC. If you believe that you have been the victim of securities fraud, contact our firm for a free consultation to learn about what rights you may have to be made whole.