H.R.216 - Securities Enforcement Clarity Act of 2025; SEC Act of 2025 (119th Congress)
Summary
H.R. 216, also known as the Securities Enforcement Clarity Act of 2025 or the SEC Act of 2025, seeks to amend several key securities laws. These include the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940, and the Investment Advisers Act of 1940. The bill focuses on clarifying how violations are determined under these acts.
Specifically, it aims to define when multiple acts of noncompliance should be considered a single violation for penalty assessment. This is when the acts stem from a common cause, the same misstatement, or a continuing failure to comply.
The bill was introduced in the House of Representatives by Mr. Sessions and referred to the Committee on Financial Services.
Expected Effects
The primary effect of this bill, if enacted, would be to limit the penalties imposed on entities for securities violations. It does this by consolidating multiple acts of noncompliance into single violations under specific circumstances.
This could lead to reduced financial burdens for companies facing SEC enforcement actions. It may also impact the SEC's ability to deter future misconduct through substantial penalties.
Potential Benefits
- Reduced Penalties for Companies: Companies may face lower fines for violations if multiple non-compliant acts are considered a single violation.
- Clarity in Enforcement: The bill provides clearer guidelines for determining the number of violations, potentially reducing ambiguity in SEC enforcement actions.
- Fairer Application of Penalties: By focusing on the originating cause of violations, the bill may lead to a more equitable application of penalties.
- Reduced Litigation: Clearer definitions could lead to fewer disputes over the number of violations, potentially reducing litigation costs.
- Focus on Root Causes: By emphasizing the originating cause, the bill might encourage companies and the SEC to focus on addressing underlying issues rather than just penalizing individual acts.
Most Benefited Areas:
Potential Disadvantages
- Weakened Deterrence: Reduced penalties could weaken the deterrent effect of securities laws, potentially leading to increased non-compliance.
- Reduced SEC Enforcement Power: The bill could limit the SEC's ability to effectively penalize and deter securities fraud and other violations.
- Potential for Abuse: Companies might attempt to structure their actions to fit within the 'single violation' criteria, even when multiple violations have occurred.
- Complexity in Interpretation: The terms 'common cause' and 'substantially overlapping originating cause' could be subject to interpretation, leading to further litigation.
- Investor Risk: Reduced enforcement could increase the risk to investors if companies are less deterred from engaging in misconduct.
Constitutional Alignment
The bill appears to align with the Constitution, particularly Article I, Section 1, which grants legislative powers to Congress. The bill is an exercise of this power to regulate commerce and define the scope of penalties for violations of securities laws.
There are no apparent conflicts with the Bill of Rights. The bill does not infringe upon individual liberties, rights, or privacy.
However, the potential impact on investor protection and market integrity could be debated in terms of promoting the general welfare, as mentioned in the Preamble of the Constitution.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).