Monday, February 27, 2017

SEC issues statement on relief from pre-Dodd-Frank collateral bars

By Rodney F. Tonkovic, J.D.

The SEC has issued a statement on a recent D.C. Circuit decision halting the imposition of collateral bars for conduct occurring before the enactment of the Dodd-Frank Act. The court in SEC v. Bartko held that the imposition of collateral bars for conduct before the Act's effective fate was impermissibly retroactive. Having determined not to seek review of Bartko, the Commission has also provided a form for those affected by the decision to request an order vacating the bar or bars.

Bartko. Between 2004 and 2005, Gregory Bartko was behind a scheme to defraud investors through the sale of securities. After Bartko was convicted in 2010 of conspiracy, mail fraud, and selling unregistered securities, the Commission instituted a follow-on administrative proceeding in which Bartko was permanently barred from association with every class of securities market participants. At the time of his violations, however, Bartko was only associated with a broker-dealer.

In Bartko, decided on January 17, 2017, the D.C. Circuit vacated the collateral bars against Bartko from association with investment advisers, municipal securities dealers, transfer agents, municipal advisors, and nationally recognized statistical rating organizations. The 2010 Dodd-Frank Act gave the Commission the power to impose collateral bars, but applying those provisions to pre-Dodd-Frank conduct was impermissibly retroactive, the court said.

Relief from collateral bars. The Commission has decided not to seek further review of the Bartko decision. Those that are the subject of a Commission order imposing a collateral bar from associating in any capacity in the securities industry as a consequence of conduct before the July 22, 2010 enactment of Dodd-Frank may complete a form requesting that the Commission issue an order vacating the bar or bars. The Commission's statement notes that if relief is granted from the affected collateral bars, any other bars or suspension from association that were imposed will remain in force. The Commission may also bring a separate follow-on proceeding to determine whether to impose any remedial sanctions under existing law if you attempt to associate in a new capacity in the securities industry in the future.

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