Rep. Maxine Waters (D-CA) introduced last week a bill designed to ensure the Securities and Exchange Commission (SEC) protects investors via a public process for waiving automatic disqualification provisions in the law.
“By waiving the consequences for bad actors the SEC is sending the wrong message,” said Waters, the ranking member of the Committee on Financial Services with regard to the Bad Actor Disqualification Act of 2017. “The SEC should not automatically give those who break the law a free pass by allowing them to continue to conduct business as usual. This legislation will subject waiver requests to public scrutiny and robust SEC review so that the law protects investors, the markets, and the public. No one is above the law, including large financial firms.”
Certain provisions in securities laws allow law-abiding companies to engage in activities with less oversight, fewer disclosure requirements and limited liability. Companies that have been convicted of certain felonies and misdemeanors or are determined to have violated anti-fraud provisions of securities laws are automatically disqualified from such benefits, unless they obtain a waiver from the Commission.
The SEC has granted waivers on a seemingly automatic basis and has done so disproportionately for large financial firms, officials said.
Two years ago, in the wake of light a December 2014 study determining the SEC disproportionately granted 82 percent of waivers to large financial firms during the preceding eleven years, Waters unveiled draft legislation to reform the SEC’s waiver process.