SEC Suffers Two Major Legal Setbacks

U.S. securities regulators suffered two legal setbacks that will force them to speedily pursue enforcement cases and denies their jurisdiction over the sale of investments in death benefits. The enforcement time limit in particular was seen as a major restraint on the Securities and Exchange Commission because it must contend with some enormously complex paper trails that can take years to sort out. Under the limit, the SEC couldn’t act in misconduct cases more than 5 years old, such as the insider trading deals of the 1980s. Paul Gonson, the SEC’s solicitor, said he expects there will be exceptions to the five-year limit. The SEC also lost a long-running legal fight with Life Partners Inc., a Waco, Texas, company battling charges it violated securities laws in dealing with viatical settlements, or death benefits of life insurance policies. The U.S. Circuit Court of Appeals for the District of Columbia denied the SEC’s request for a rehearing on the case . . . Also, as expected, the Federal Reserve Board approved rules allowing banks to move more vigorously into stock and bond underwriting.