James Setterlund

ATR Opposes H.R. 5332, The Protecting Your Credit Score Act

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Posted by James Setterlund on Tuesday, June 30th, 2020, 4:26 PM PERMALINK

Americans for Tax Reform President Grover Norquist on Monday sent a letter to House Speaker Nancy Pelosi (D-Calif.) and Minority Leader Kevin McCarthy (R-Calif.) expressing opposition to Rep. Josh Gottheimer’s (D-N.J.) H.R. 5332, the Protecting Your Credit Score Act of 2019. Despite attempts to frame the bill as a set of protections for consumers, its core provisions would actually work against the interests of borrowers if enacted. Essentially, it would expand the power of the Consumer Financial Protection Bureau while benefitting trial attorneys and creating opportunities for cyber theft of consumer information by providing complete Social Security numbers.

H.R. 5332 gives the CFPB the power to direct the credit reporting agencies when to audit consumer reports and oversee the creation and maintenance of a designated website consumers can use to view available credit information all in one place. Additionally, the bill creates a new office under the establishment of an ombudsman within the CFPB to oversee all consumer complaints against credit reporting agencies. This person would have outsized enforcement power to oversee the credit reporting industry, including regulatory and disciplinary autonomy, with little accountability.

The Act opens the door for expanded litigation and encourages superfluous legal challenges through its injunctive relief provision. Businesses could expect to see an influx of challenges to credit report information stemming as the designated website would erase negative but accurate information on a borrower’s credit history from being included in credit reports. The abuse of the tool will open the door to a surge of lawsuits to correct the record that will be far more lucrative to attorneys than helpful in protecting consumers and businesses. The cost of litigation resulting from H.R. 5332 would result in increased costs to produce credit reports that will be paid by consumers.  

Additionally, the bill requires credit reporting agencies to use consumers’ full Social Security numbers in reports against the current practice of only using the last four numbers. By itself this would expose consumers and companies to increased risk of cyber theft, but the problem is intensified with H.R. 5332. The designated website would be built by credit reporting agencies but owned and overseen by neither the agencies nor the CFPB. The website will contain the information of every consumer and serve as a prime target for bad actors seeking to access Social Security numbers in which additional financial products can be created using customers names but without their knowledge.

Though Gottheimer and others sought to protect consumers’ credit scores by increasing transparency in credit reporting, the consequence of their proposals will inevitably lead to the opposite. H.R. 5332 passed out of the House Financial Services Committee on a partisan vote of 31-24 with all Committee Democrats supporting the bill. It passed the House with a vote of 234-179 but faces opposition in the Senate.

Read the full letter here.

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ATR Supports the Community Bank Regulatory Relief Act

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Posted by James Setterlund on Wednesday, June 17th, 2020, 2:43 PM PERMALINK

Americans for Tax Reform President Grover Norquist sent a letter to Senators Kevin Cramer (R-N.D.), Tom Cotton (R-Ark.), Jerry Moran (R-Kan.), and Thom Tillis (R-N.C.) expressing support for their legislation, the Community Bank Regulatory Relief Act. S. 3502 will reduce regulatory barriers to help community banks lend additional capital to their Main Street customers during the healthcare emergency.

The COVID-19 pandemic continues to negatively impact the economy and community banks are particularly vulnerable. Senator Tillis has commented that the legislation will provide “regulatory relief to those financial institutions and allow them to play an important role in our economic recovery.” S. 3502 has two commonsense changes that will aid community banks in sustaining operations.

First, the Act lowers the community bank leverage ratio – a ratio of capital to unweighted assets – from 9% to 8%. A lower CBLR requirement will allow community banks to maintain their status while freeing up resources to meet customers financial needs quickly during uncertain times. This will amendment to Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, passed by President Trump in 2018 and supported by ATR. Banks that opt-in to the CBLR metric and meet the ratio requirement are considered “well capitalized” for prompt corrective action purposes, a status that is extremely important in times of economic uncertainty.

Second, the act delays implementation of the Current Expected Credit Loss accounting standards until December 2024. CECL directs banks to set aside lifetime loss reserves at the time of loan origination – as opposed to a marker of when loss appears probable under current GAAP standards. This requires banks to make predictions about the future in the middle of increasingly uncertain times.

Implementing CECL is cumbersome and expensive. Community banks are far behind larger banks with more resources to devote to compliance. As the size of assets held by a bank decreases, the cost of regulatory compliance increase. Tailored regulatory relief like S. 3502 will be helpful to community banks, and this delay of CECL would allow Main Street banks to lend more funds to consumers in need.  

There has been much pushback and opposition from the banking industry and members of Congress against CECL since the standard was passed in 2016, with an almost immediate proposal from the Financial Standards Accounting Board. Traditionally, FASB set an effective date for SEC reporting companies and other public businesses while affording an extra year for private companies, small businesses and nonprofits to come into compliance with their new accounting standards. The CECL proposal was open for public comment until September 16, 2019 – however, no decision was made before the escalation of the coronavirus pandemic about further delaying the compliance deadline for smaller institutions.

We applaud Senators Cramer, Cotton, Moran, and Tillis for introducing the Community Bank Regulatory Relief Act and recognizing the reducing regulatory barriers for our nation’s community banks during the healthcare emergency. We also thank Senators Tim Scott (R-S.C.) and Kelly Loeffler (R-Ga) for supporting S. 3502 to help our Main Street institutions can continue to lend to the community.

The full letter can be found here.

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ATR Proposes Solutions to Jumpstart the Economy and Create Jobs

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Posted by James Setterlund on Wednesday, May 20th, 2020, 3:57 PM PERMALINK

Americans for Tax Reform sent a letter to the Chairman Mike Crapo (R-Idaho) and Ranking member Sherrod Brown (D-Ohio) of the Senate Banking, Housing and Urban Affairs Committee urging members to consider policy proposals that will further stimulate economic growth beyond government assistance in the form of loans and grants to business and Americans.

Last week, House Democrats led by House Speaker Nancy Pelosi (D-Calif.), unveiled a roughly $3 trillion bill to combat the effects of the healthcare emergency. Much of the news coverage has been favorable of the legislation and has been highlighted as a victory for healthcare workers and providing more funding for more COVID-19 testing. But Pelosi is pushing a bill that follows her previous playbook of using the emergency as an opportunity to advance progressive priorities that have nothing to do with the protecting Americans’ health.

In fact, Pelosi’s “Health and Economic Recovery Omnibus Emergency Solutions Act’’ or ‘‘HEROES Act’’ includes similar provisions that were left out of her version of the “Take Responsibility for Workers and Families Act” – the precursor bill she used to negotiate with the Senate before both chambers finalized the Coronavirus Aid, Relief and Economic Security Act, otherwise known as the CARES Act that was signed into law by President Trump on March 27th.

Included in the Pelosi proposal is a $25 billion-dollar bailout for the US Postal Service and a rewriting of election law to permit voting by mail while ignoring the multiple documented cases of fraud and abuse of mail-in voting. Pelosi plans to move the legislation quickly for a vote in the House and use the bill’s passage as a negotiating point with the Senate. Senate Majority Leader Mitch McConnell (R-Ky) has already indicated that the Senate does not yet see the need to move another multi-trillion dollar relief bill, and if there is a need, the push for Senate legislation will occur in June.

While McConnell is willing to consider fiscal restraint before another large spending bill, Congress should also consider legislative proposals that will rapidly spur economic growth. As several relief focused legislative packages have been enacted with broad bipartisan backing to provide support for Americans, state and federal regulators have played an important role in alleviating businesses from burdensome regulations that have allowed their operations to swiftly respond and innovate to meet the demands of the public.

Several states and cities are also taking a tiered approach of introducing small steps to allow some businesses to re-open for commerce. This provides a unique opportunity to codify pro-growth regulatory initiatives and for Congress to consider policies that will help jump-start the economy and allow businesses of all sizes the flexibility to meet the needs of customers, taxpayers and the general public for years to come.

Once the emergency of COVID-19 has subsided, Congress will play an important role in considering legislation that helps Americans return to their jobs and their roles in the community. As such, it is important to preserve or enact policy solutions that help ensure our nation’s financial institutions can continue function properly and provide the economic certainty and fulfillment Americans need to reenter a labor market ready to re-open.

Click here to review our letter.

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ATR Signs Coalition Letter Opposing any Legislation that Would Alter the Credit Reporting Process

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Posted by James Setterlund on Tuesday, May 12th, 2020, 4:39 PM PERMALINK

Americans for Tax Reform joined a coalition of free-market organizations, led by the National Taxpayers Union, to oppose any congressional effort to suppress credit reporting information in future COVID-19 legislative relief packages.

On March 27, President Trump signed the Coronavirus Aid, Relief and Economic Security Act, otherwise known as the CARES Act, which provided over $2 trillion in relief to Americans and businesses. The bill started as a Senate product under the leadership of Senate Majority Leader Mitch McConnell (R-Ky), before reaching a compromise with the House of Representatives’ legislative product. Before House Speaker Nancy Pelosi (D-Calif) agreed to use McConnell’s legislation to build upon, House Democrats were working on a “relief” bill disguised as a wish-list filled with progressive priorities.

The Pelosi alternative Phase 3 bill, the “Take Responsibility for Workers and Families Act” includes various provisions, such as: investing $35 million on the Kennedy Center and $200 million to require airlines to purchase costly “renewable” jet fuel. Also incorporated into Pelosi’s legislation was the Chairwoman of the Financial Services Committee, Maxine Waters’ (D-Calif), draft legislation that mirrors the Speaker’s Christmas-tree approach of using the healthcare emergency to pass progressive-agenda items. Included in the Speaker’s final draft was a provision that would have prohibited negative consumer information from being included on an individual’s credit score and a moratorium on lenders furnishing adverse information.

Credit reports identify a barrowers payment history, debts incurred and paid, and other financial information that combine to produce a customer’s credit score. The score is a risk indicator for lenders to use and help determine a borrower’s ability to repay a lender, and also impacts the interest rates borrowers pay on a loan or credit card. By proposing to reduce the accuracy of information associated with credit reports, Democrats are effectively punishing borrowers who need access to credit now more than ever in this health emergency, and lenders who will be unable to appropriately measure a barrowers credit standing. During the financial crisis of 2008, it was revealed that excessive loans were made to borrows who had more house than they could afford, which could happen again if progressive ideas move forward into legislation.

Less accurate credit reports can reduce the amount of credit extended or lead to increased interest rates as lenders will become even more cautious when analyzing reports for authenticity. For borrowers, Democrat’s proposals to suppress negative information will create unintended consequences by increasing the cost of credit to account for ambiguity of positive and negative information comprised in the credit score. It can be expected that the unintended consequences will directly impact unbanked and underbanked Americans most.

The current period of economic uncertainty calls for a federal response to be targeted in its efforts to provide immediate relief to assist millions of Americans and small businesses. Congress should not use any relief legislation as an opportunity to advance pet priorities that have nothing to do with directly benefiting Americans. 

Click here to review the letter.

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Consumers Need Certainty, It Is Time to Withdraw Obama-era Judgements

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Posted by James Setterlund on Wednesday, April 29th, 2020, 12:25 PM PERMALINK

Director of the Consumer Financial Protection Bureau and Trump appointee, Kathy Kraninger, has been leading the financial regulator for over a year and has done an impeccable job reversing Obama-era regulations that hindered innovation and increased the cost to obtain credit for consumers across the US. However, a consent decree entered into by the Bureau’s founding Director on his way out the door remains a hold-over headache that has punished student loan borrowers who rely on private loans and investors who purchased these securitized products as a tool to diversify their retirement portfolio. 

In September 2017, the CFPB under Obama-appointed Director, Richard Cordray, entered into a consent decree with the National Collegiate Student Loan Trusts and their loan servicer, Transworld Systems, Inc. as one of his last enforcement actions before leaving the Bureau. The 15 Trusts held $12 billion in private loans for 800,000 borrowers, of the which the loans were securitized and sold to investors. Typically, investors holding these securitized financial products include pension and retirement plans.

Concerningly, the Bureau appears to have intentionally defined or inappropriately misinterpreted the Trusts as debit collectors under the “covered persons” provision of Dodd-Frank. In Section 1024 of the Dodd-Frank Act, the Act refers to “covered persons” primarily as businesses dealing in real estate loan origination, offer and servicing and “a larger participant of a market for other consumer financial products and services.”

It would appear that former Director Cordray exceeded his authority by capturing Trust investors in the Bureau’s consent decree. The erroneous categorization of the Trusts as “covered persons” allowed the Bureau to deem Transworld Systems, acting as a servicer, as an “affiliate” within the statutory definition of Dodd-Frank. Subsequently, Trust investors have been apprehended in the Bureau’s ruling and have seen the gains forfeited because of Cordray’s actions.

Representatives Zeldin, Budd and Duffy raised these concerns in a letter to Director Kraninger how Cordray’s order  “penalize[s] innocent actors, including pensions plans, retirement plans, and by extension the consumers that have entrusted their savings to them, for a third party's alleged misconduct.” As a result, the private student loan market can expect credit to constrict or become more expensive to access, and investors who utilize this product to diversify their retirement portfolio may see these investment opportunities vanish from the market. Creating certainty for investors and market participants is more important now to help stabilize the securitization market and should be consider with urgency. Director Kraninger should continue her pro-growth agenda by withdrawing the Obama-era consent decree.

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ATR Signs Coalition Letter to Prevent Expansion of the Durbin Amendment

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Posted by James Setterlund on Monday, April 27th, 2020, 11:27 AM PERMALINK

Americans for Tax Reform joined a broad coalition of free market organizations to oppose any effort by Congress to exploit the Covid-19 healthcare emergency to further expand Dodd-Frank-era price controls. The coalition letter led by Competitive Enterprise Institute implores Congress to refrain from using the emergency as an excuse to expand Dodd-Frank’s Durbin Amendment to cap interchange fees on credit cards, as the Amendment has already done so for debit cards.

The Durbin Amendment was a last-minute addition on the Dodd-Frank Wallstreet Reform and Consumer Protection Act, and installed routing mandates and a cap on debit card interchange fees. Interchange fees are charged at the point of sale by banks and credit unions on debit and credit cards transactions. These fees help fund software and hardware systems that ensure secure transactions and help protect customers from card fraud.             

Named after Illinois Senator Dick Durbin, the Amendment instructed the Federal Reserve to cap the amount which payment companies and banks with over $10 billion in assets can charge merchants and retailers for debit card purchases. These fees are currently capped at roughly 21 – 23 cents per-charge.

Prior to the Durbin Amendment, merchants would be charged around 1 percent per-transaction. For example, a retailer selling a smartphone for $300 would pay a $3 fee to the bank as a small insurance policy to counteract the risk of fraud or overdrafts from the consumer. As noted by the Competitive Enterprise Institute, the average swipe fee was 44 cents per transaction.

Merchants and retailers that supported the Amendment promised savings would be passed onto consumers in the form of reduced prices in stores. A May 2017, the Congressional Research Service report stated, “Merchants that were paying fees above the regulated interchange fee had expected to benefit from the rule. Evidence from a 2015 study, however, suggests that the regulation has had a limited and unequal impact in terms of reducing merchants’ costs.”

A 2015 study by the Richmond Federal Reserve has shown that most big-box retailers like Target and Walgreens have failed to pass these savings on to the consumer by lowering the cost of items. A 2017 International Center for Law and Economics report found that large retailers saved an estimated $40 billion for their bottom line, while customers did not see a reduction in price of goods.

Consumers are paying more at the bank counter as well through increased banking fees. According the Boston Federal Reserve, the Durbin Amendment has cost large banks nearly “$14 billion a year or more than 5 percent of core total noninterest income.” To recover their annual revenue losses, banks eliminated debit card reward programs, installed high fees on minimum deposit accounts that grew from $109.28 in 2008 to $670.74 in 2016, and charged high monthly maintenance charges on accounts which climbed from $5.90 in 2009 to $13.25 in 2017. Additionally, the number of free checking accounts fell from 60 percent in 2009 to 20 percent as of January 2019. Finally, according to Federal Reserve research, 1-in-4 small banks currently lose money on each debit transaction, explaining many of these consequences.

The decreased availability of free checking accounts and accounts with no minimum balance have hurt America’s most vulnerable consumers. Since the enactment of the Amendment, debit card adoption from lower-income households (less than $25,000 per year) dropped by roughly 10 percentage points relative to households earning between $50,000 and $75,000 annually. Instead of helping America’s consumers, the Durbin Amendment has increased the number of unbanked Americans.

In the most recent relief legislation, House Democrats delayed the legislation from moving forward by insisting many of their green energy provisions and increased funding for performance arts were included in the bill before the House would vote on the legislation. Congress should not use any relief legislation as opportunity to advance pet priorities that have nothing to do with directly benefiting Americans. 

Click here to review the letter.

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ATR Signs Coalition Letter to Oppose SEC’s Obama Era Regulation

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Posted by James Setterlund on Tuesday, February 11th, 2020, 2:52 PM PERMALINK

Americans for Tax Reform signed a coalition letter alongside other free-market organizations to encourage the Securities and Exchange Commission to abandon its plans to regulate the use of certain financial products and implement additional sales-practice rules between broker-dealers, investment advisors and their clients. The proposed rule will place onerous and unnecessary qualification requirements on American investors before they can freely purchase or sell certain securities openly traded in public markets.

The SEC plans to re-introduce a 2015 Obama era regulation that will inherently restrict investors ability to purchase a specific type of Exchange Traded Fund. Known as “geared” ETFs, these products are “leveraged”, meaning they typically offer investors the opportunity to earn two – three times the daily rate of return of a benchmark like the S&P 500. Like any investment product, they carry some form of risk, paired with the opportunity to earn higher returns. Geared ETFs have been available for investors to own for over 25 years, and are commonly purchased as short-term investments, rather than the buy and hold strategy of investing in government bonds that earn small but steady return from the interest on the bond.

If the SEC moves forward with its proposed regulation, the rule will require broker-dealers to collect detailed personal information. After the information is collected, the broker-dealer is then empowered to determine if their client or perspective client is “capable” of understanding the risks of this product. If the broker-dealers or investment advisors determine clients do not meet this arbitrary “capability” standard, clients and investors will be prohibited from purchasing these funds and denied an opportunity to own products that may help them achieve the higher rates of return they desire.

Furthermore, the recently implemented Regulation Best Interest laws already empower broker-dealers to decide what’s best for their clients, and the implementation of these proposed rules will only further burden investors. If the proposal is implemented in its current form, the SEC will have effectively placed themselves between investors and their trusted brokers or advisors allowing investors to only choose from options the government deems appropriate.

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ATR Signs Coalition Letter Urging the SEC to Pause the CAT

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Posted by James Setterlund on Thursday, January 16th, 2020, 10:50 AM PERMALINK

Americans for Tax Reform signed a coalition letter led by Heritage Action for America encouraging the Securities and Exchange Commission to refrain from implementing the Consolidated Audit Trail.

The CAT National Market System is a database established after the 2010 “Flash Crash”, when the SEC began requiring broker-dealers, trading venues and stock exchanges to report all securities transactions and customer information to a single database this year. The CAT is a Delaware company jointly owned by broker-dealers on a co-equal basis, with the SEC, the Financial Industry Regulatory Authority, and 23 additional self-regulatory agencies having authority to access the database. The Heritage Foundation’s David Burton notes that as many as 3,000 regulatory users may be able to access the database.

ATR joined the coalition letter as we share the concerns of members of Congress, current SEC Commissioner Hester Peirce, and organizations representing private businesses and everyday investors who fear the collection of personal identifiable information leaves the CAT a ripe target for cyber theft, and does little to stamp out fraud within the financial markets.

Additionally, if the CAT is breached by nefarious actors there is little recourse for consumers in terms of who or what entity bears the financial burden of making consumers and companies whole. Without additional consideration of electronic breaches, it could be the consumer or taxpayers who are left picking up the tab.

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ATR Supports Sen. Cruz Bill to End Operation Choke Point

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Posted by James Setterlund on Tuesday, December 10th, 2019, 5:03 PM PERMALINK

Senator Ted Cruz (R-Texas) introduced his “Financial Institution Customer Protection Act of 2019,” which will protect small businesses from an unconstitutional directive similar to the 2013 Department of Justice initiative, “Operation Choke Point.” Choke Point was then administered by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency and threatened financial institutions to cut off all banking activities to legally operating businesses deemed “high risk” by these financial agencies.

From 2013 until the initiative ended in 2017, the FDIC and OCC used their enforcement authority to pressure banks not to lend to businesses in industries the agencies found unsavory. Regulators threatened to increase their oversight of banks that chose to continue financing activities with their customers in these industries. The initiative targeted short-term lenders, firearms and ammunition retailers, pawn shops, and other legally operating business, forcing many small businesses to search for unsecured access to capital or close its doors. This legislation ensures the DOJ and all financial regulators will not be able to abuse its enforcement power in an unconstitutional manner again. 

ATR thanks Senators Crapo, Kennedy, Tillis, Sasse, Inhofe, Braun, Lee, Cornyn, and Hyde-Smith for their support by co-sponsoring this bill. ATR president Grover Norquist also thanks Rep. Blaine Luetkemeyer, R-Mo., for his tireless efforts in the House of Representatives to secure the liberties of legally operating businesses and bring to light this abuse by the Obama administration.

Click here to read the full coalition letter.

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ATR Opposes H.R. 4344, which would Expand SEC Bureaucratic Authority

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Posted by James Setterlund on Monday, October 28th, 2019, 2:55 PM PERMALINK

ATR President Grover Norquist sent a letter to Speaker Nancy Pelosi (D-Cal.) and Minority Leader Kevin McCarthy (R-Cal.) expressing his strong opposition to Rep. Ben McAdams’ (D-U.T.) legislation, H.R. 4344. This legislation would overturn a unanimous Supreme Court decision and allow members of Congress to push precedent aside and allow the Securities and Exchange Commission to target businesses with little deference toward due process and allowing for pending complaints to remain dormant for over a decade.

H.R.4344 would expand the SEC’s statute of limitations for disgorgement claims from 5 years to 14 years, a new threshold that provides an avenue for greater power centralized at the Commission. In the letter, Norquist voices concern that this legislation would heighten compliance costs, costs that would be passed on to the investors saving for retirement at a time when the cost to retire comfortably continues to rise. 


The full letter can be found here and below.


The Honorable Nancy Pelosi, Speaker

US House of Representatives

H-323, The Capitol

Washington, DC 20515


The Honorable Kevin McCarthy, Minority Leader

H-204, The Capitol

US House of Representatives

Washington, DC 20515


Dear Speaker Pelosi and Minority Leader McCarthy:

I write in strong opposition to H.R. 4344, a bill to amend the Securities Exchange Act of 1934 to allow the Securities and Exchange Commission to seek and Federal courts to grant disgorgement of unjust enrichment, and for other purposes. This legislation would do little to protect investors and instead would expand the SEC’s authority. H.R. 4344 would create uncertainty within the marketplace as investors would begin operating under the assumption that future statutes of limitations established by legal precedent are movable and can be changed on a political whim. Should this legislation become law, those saving for retirement will be expected to pick up the tab for the additional regulatory burdens placed on businesses.  

In 2017, the Supreme Court agreed to hear Kokesh v. SEC, in which the question before the Court was whether the SEC has the authority to seek the repayment of funds through disgorgement after a five-year statute of limitations has expired. The Supreme Court unanimously held that “Disgorgement, as it applied in SEC enforcement proceedings, operates as a penalty under Section 2462. Accordingly, any claim for disgorgement is an SEC enforcement action must be commenced within five years of the date the claim accrued.”

Under current law, the SEC is required to bring disgorgement claims within 5 years of an alleged violation. This promotes effective deterrence and provides the SEC with more than enough time to discover violations of securities laws and file complaints in a timely manner. Anything longer would undermine the due process rights of defendants and hamper their ability to address the claims.

If H.R. 4344 were to be enacted, Congress will have effectively overturned a unanimous decision by the Supreme Court. Additionally, this bill will expand the SEC’s authority to target businesses with little deference toward due process that allows pending complaints to remain dormant for over a decade.

For these reasons, I oppose H.R. 4344 and encourage Representatives to vote against this legislation as it would restrict the due process rights of businesses and investors. I worry H.R. 4344 provides a gateway for future legislation that moves the goal posts of due process and provides even greater power to government regulators over legally operating businesses. This would be a slippery slope for the rule of law.


Grover G. Norquist
President, Americans for Tax Reform

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