BulletProofBlog the blog on crisis communications

Among the provisions that were included in the financial regulation package (and weren’t front page news) passed by the House of Representatives on December 11, several are poised to dramatically impact the Securities and Exchange Commission’s (SEC) power and authority.

Should the bill become law, major changes to civil securities litigation would almost certainly lead to stiffer enforcement and an expanded reach with which to go after financial companies and brokers who have stepped outside the law. While the Senate still needs to act, and the eventual shape of a final bill is still distant, there is no question that more powerful regulators are in the future.

Among the proposed law’s strictures are measures that would give the SEC access to information obtained through grand jury proceedings, subject to a showing of substantial need. This is a fairly large increase in the Commission’s arsenal and one that companies and individuals must be mindful of moving forward.

Investors are also being offered the opportunity to get into the regulatory arena as this bill would allow the SEC to award up to 30 percent of any monetary sanctions exceeding $1 million imposed as a result of a successful securities fraud enforcement action based on a whistle-blower’s tip. For companies, their internal reporting systems will likely see a fall off in tips as more individuals look for opportunities to report on what they see as wrongdoing – and get paid for it.

Commission investigations will speed up as well. A new provision would mandate that by, at most, 180 days after a defendant submits a Wells Submission (a voluntary statement that defendants can give to the SEC that outlines why they did not violate the securities laws) the Enforcement Division will have to take some action – the case can no longer just linger. For those companies and individuals involved, this will help to provide some idea of when the investigatory phase will come to an end.

These enhanced investigative and enforcement tools have been atop the SEC’s wish list for some time. As a result of global financial crisis and the anger that still exists among consumers and investors, it seems Congress now has the justification it needs to hand them over. And while an overhaul of financial regulation still faces significant legislative hurdles before it reaches President Obama’s desk, the message from the House is clear: when it comes to restoring market confidence via strict regulatory enforcement, Congress wants to be seen as giving regulators whatever powers they say the need.

Michael W. Robinson is Senior Vice President and Chair of the Corporate Practice at Levick Strategic Communications, the nation's top crisis communications firm. He is also a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.