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SEC will not appeal ruling preventing certain retroactive penalties

By Sarah N. Lynch

By Sarah N. Lynch

WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission has decided not to appeal a court ruling that limited its ability to punish bad actors for misconduct that predated the 2010 Dodd-Frank Wall Street reforms, the agency announced Thursday.

The SEC's decision comes after the U.S. Court of Appeals for the District of Columbia ruled in January that the regulator overstepped its authority when it barred attorney and stock broker Gregory Bartko from working in various financial services sectors, including the transfer agent and municipal securities industries.

Bartko was previously criminally convicted of conspiracy, mail fraud and illegal sales of unregistered securities in 2010.

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The SEC has routinely taken civil actions to bar defendants from continuing to work in their particular sector if they are convicted of securities fraud.

However, the 2010 Dodd-Frank Wall Street reform law broadened the SEC's powers by letting the regulator ban those who engaged in financial misconduct from working in a wider array of financial services sectors, even if the person did not work in that space before.

Now, under the 2010 law, if a broker is convicted of fraud, the SEC can bar that broker from working for the investment advisory, municipal securities, credit-rating and transfer agent sectors as well.

The SEC in 2012 barred Bartko from working for investment advisers, brokerages, municipal securities dealers and transfer agents as a result of his criminal conviction.

But Bartko fought back, contending that the SEC could not retroactively impose most of these industry bars because the misconduct predated the SEC's new 2010 powers.

The SEC on Thursday invited any other defendants who are in a similar position and had industry bars retroactively imposed on them to file a formal request with the agency to have those bars vacated.

(Reporting by Sarah N. Lynch; Editing by Phil Berlowitz)

 
 
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