107th CONGRESS
2d Session
S. 1933
To amend the Securities Exchange Act of 1934 and the Securities Act
of 1933, to address liability standards in connection with violations of the
Federal securities laws, and for other purposes.
IN THE SENATE OF THE UNITED STATES
February 12, 2002
Mr. SHELBY introduced the following bill; which was read twice and referred
to the Committee on Banking, Housing, and Urban Affairs
A BILL
To amend the Securities Exchange Act of 1934 and the Securities Act
of 1933, to address liability standards in connection with violations of the
Federal securities laws, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Investor Protection Act of 2002'.
SEC. 2. LIABILITY STANDARDS IN PRIVATE SECURITIES LITIGATION.
(a) IN GENERAL- Section 21D(f) of the Securities Exchange Act of 1934 (15
U.S.C. 78u-4(f)) is amended to read as follows:
`(1) JOINT AND SEVERAL LIABILITY FOR DAMAGES- Any covered person against
whom a final judgment is entered in a private action arising under this
title shall be liable for damages jointly and severally.
`(2) SETTLEMENT DISCHARGE-
`(A) IN GENERAL- A covered person who settles any private action arising
under this title at any time before final verdict or judgment shall be
discharged from all claims for contribution brought by other persons.
`(B) BAR ORDER- Upon entry of a settlement described in subparagraph (A)
by the court, the court shall enter a bar order constituting the final
discharge of all obligations to the plaintiff of the settling covered
person arising out of the action, which order shall bar all future claims
for contribution arising out of the action--
`(i) by any person against the settling covered person; and
`(ii) by the settling covered person against any person, other than
a person whose liability has been extinguished by the settlement of
the settling covered person.
`(C) REDUCTION- If a covered person enters into a settlement with the
plaintiff prior to final verdict or judgment, the verdict or judgment
shall be reduced by the greater of--
`(i) an amount that corresponds to the percentage of responsibility
of that covered person; or
`(ii) the amount paid to the plaintiff by that covered person.
`(A) IN GENERAL- A covered person who is jointly and severally liable
for damages in any private action arising under this title may recover
contribution from any other person who, if joined in the original action,
would have been liable for the same damages. A claim for contribution
shall be determined based on the percentage of responsibility of the claimant
and of each person against whom a claim for contribution is made, as determined
by the court.
`(B) STATUTE OF LIMITATIONS FOR CONTRIBUTION- In any private action arising
out of this title determining liability, an action for contribution shall
be brought not later than 6 months after the date of entry of a final,
nonappealable judgment in the action.
`(4) APPLICABILITY- Nothing in this subsection shall be construed to create,
affect, or in any manner modify, the standard for liability associated with
any action arising under the securities laws.
`(5) DEFINITIONS- For purposes of this subsection--
`(A) the term `covered person' means--
`(i) a defendant in any private action arising under this title; or
`(ii) a defendant in any private action arising under section 11 of
the Securities Act of 1933, who is an outside director of the issuer
of the securities that are the subject of the action; and
`(B) the term `outside director' shall have the meaning given such term
by rule or regulation of the Commission.'.
(b) CONFORMING AMENDMENT TO THE SECURITIES ACT OF 1933- Section 11(f)(2)(A)
of the Securities Act of 1933 (15 U.S.C. 77k(f)(2)(A)) is amended by striking
`in accordance' and all that follows through the period and inserting `in
accordance with section 21D(f) of the Securities Exchange Act of 1934.'.
(c) APPLICABILITY- The amendments made by this section shall not affect or
apply to any private action arising under the securities laws commenced before
and pending on the date of enactment of this Act.
SEC. 3. PERSONS WHO AID AND ABET VIOLATIONS.
(a) COMMISSION AUTHORITY- Section 20(e) of the Securities Exchange Act of
1934 (15 U.S.C. 78t(e)) is amended by striking `knowingly' and inserting `recklessly'.
(b) PRIVATE LITIGATION- Section 21D of the Securities Exchange Act of 1934
(15 U.S.C. 78u-4) is amended by adding at the end the following:
`(g) PERSONS THAT AID OR ABET VIOLATIONS- Any person that recklessly provides
substantial assistance to another person in violation of a provision of this
title, or of any rule or regulation issued under this title, shall be deemed
to be in violation of such provision to the same extent as the person to whom
such assistance is provided.'.
SEC. 4. STATUTE OF LIMITATIONS.
Title I of the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.) is
amended by adding at the end the following new section:
`SEC. 37. STATUTE OF LIMITATIONS.
`(a) IN GENERAL- Except as otherwise specifically provided in this title,
and notwithstanding section 9(e), an implied private right of action arising
under this title may be brought not later than the earlier of--
`(1) 5 years after the date on which the alleged violation occurred; or
`(2) 3 years after the date on which the alleged violation was discovered.
`(b) EFFECTIVE DATE- The limitations period provided by this section shall
apply to all proceedings commenced after the date of enactment of the Investor
Protection Act of 2002.'.
SEC. 5. REPEAL OF CERTAIN CLASS ACTION LIMITATIONS.
(a) Securities Exchange Act of 1934- Section 28 of the Securities Exchange
Act of 1934 (15 U.S.C. 78bb) is amended--
(1) in subsection (a), by striking `Except as provided in subsection (f),
the' and inserting `The'; and
(2) by striking subsection (f).
(b) Securities Act of 1933- Section 16 of the Securities Act of 1933 (15 U.S.C.
77p) is amended to read as follows:
`SEC. 16. REMEDIES ADDITIONAL.
`The rights and remedies provided by this title shall be in addition to any
and all other rights and remedies that may exist at law or in equity.'.
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