SEC Will Vacate Collateral Bars for Pre-Dodd-Frank Conduct
The SEC will allow respondents/defendants subject to collateral bars to seek to vacate those bars if the conduct occurred before July 22, 2010, the date that the Dodd-Frank Act was enacted. Collateral bars, authorized by Dodd-Frank, allow the SEC to bar respondents from associating with certain regulated entities (e.g. RIA, BD) even if the respondent was not associated with that type of entity during the alleged misconduct. A recent decision by the U.S. Court of Appeals for the D.C. Circuit vacated a collateral bar because the SEC applied the bar retroactively to conduct that occurred before Dodd-Frank. The SEC provides a form for seeking to vacate the collateral bar.
OUR TAKE: As far back as 2012, we questioned the legality of collateral bars for conduct that pre-dates Dodd-Frank. (See SEC Imposes Dodd-Frank Remedies on Conduct Pre-Dating Enactment.) However, the Dodd-Frank Act still empowers the SEC to impose collateral bars for any post-2010 conduct.