Overnight Regulation: Supreme Court puts new limits on SEC penalties

Welcome to Overnight Regulation, your daily rundown of news from the federal agencies, Capitol Hill, the courts and beyond. It’s Monday in Washington where President Trump sparked new outrage with his early morning tweets.

 

THE BIG STORY 

The Supreme Court issued a ruling Monday that curbs the power of the nation’s top securities regulator to recoup profits earned in fraudulent trades.

In a unanimous ruling, the justices said the Securities and Exchange Commission can order companies to pay back illegal profits through disgorgement, but has to do so within five years of any fraud claim.

The court’s decision reverses the 10th Circuit Court of Appeals ruling that ordered Charles Kokesh to pay $34.9 million in profits he misappropriated from four business development companies from 1995 to 2009.

• What’s at issue? An SEC remedy known as “disgorgement,” which is used to penalize those accused of committing financial crises. The SEC can fine a person or business for breaking the law. Disgorgement is meant to seize profits earned from that criminal activity as another sanction.
• Lower court ruling: The 10th Circuit said disgorgement wasn’t a penalty and therefore not subject to the statute of limitations.
• What SCOTUS said: Justice Sonia Sotomayor in the court’s opinion said disgorgement “bears all the hallmarks of a penalty” for which a five-year statute of limitations applies. “It is imposed as a consequence of violating a public law and it is intended to deter, not to compensate.”
• The stakes: The SEC fielded 868 enforcement actions in 2016, taking more than $4 billion in fines and pulled back profits.

For the full story on the decision click here.

 

ON TAP FOR TUESDAY 

Education Secretary Betsy DeVos is scheduled to testify before the Senate Appropriations Subcommittee on Labor, Health, Human Services, Education and Related Agencies on the Education Department’s proposed fiscal 2018 budget. 

The House Rules Committee is expected to vote on the Republican-backed bill to roll back the Dodd-Frank Wall Street Reform Act. The Rules Committee move will clear a vote on the House floor later this week. But the legislation is likely dead in the Senate, where Republicans want more narrow reforms. Click here for more on the bill.

Off Capitol Hill, the Brookings Institution holds a discussion on Dodd-Frank’s Orderly Liquidation Authority (OLA), which would help wind down failing firms to protect the economy. Among the panelists will be former Fed Chairman Ben Bernanke.

 

REGULATORY ROUNDUP 

Energy: Environmental groups are suing President Trump for delaying Obama-era standards to limit methane pollution. 

The groups, which include the Natural Resources Defense Council (NRDC) and the Sierra Club, claim the Environmental Protection Agency (EPA) violated the law by delaying the rule for 90 days while the agency considers whether to squash it altogether. 

The new standards, which order pneumatic pumps at oil and natural gas well sites to reduce methane emissions, were part of former President Barack Obama’s wide-ranging strategy to reduce methane emissions across numerous industries. EPA head Scott Pruitt challenged the rule in his last job as Oklahoma’s attorney general.

The Hill’s Timothy Cama reports on the lawsuit here.

 

Tech: State attorneys general are pushing the Federal Communications Commission (FCC) to limit the amount of robo- or automated calls telemarketers are allowed to make.

At issue now are calls that allow automated robocall marketing services to bypass customers and go straight to their voicemail. The FCC is looking at whether to officially allow the practice following a petition from those companies.

But in a joint letter on Monday, attorneys general from New York, Massachusetts and Kentucky urged the agency not to do so.

“The federal government has a basic responsibility to protect American consumers, New York Attorney General Eric Schneiderman (D) said. “That certainly doesn’t mean making it even easier for companies to spam them with costly, unsolicited, ringless robocalls.”

As The Hill’s Ali Breland reports, even the Republican National Committee is jumping into the fight.

 

Energy: The Trump administration is set to propose allowing several companies to use seismic air guns to search for oil and gas reserves beneath the floor of the Atlantic Ocean.

In a notice to be published in Tuesday’s Federal Register, the National Marine Fisheries Service is asking for Marine Mammal Protection Act permits allowing five companies to conduct the seismic surveys. The air guns are considered dangerous to certain types of marine wildlife.

The oil surveys come as the Trump administration aims to loosen restrictions on potential Atlantic drilling operations. There are no drilling rigs off the East Coast of the U.S. right now, and it will take years of testing to even know where there is oil.

The Hill’s Timothy Cama has more here.

 

Health: Nursing homes would be allowed to enter into binding arbitration agreements with patients under a proposed rule released Monday from the Centers for Medicare and Medicaid Services.

The proposal would repeal a 2016 rule that prohibited nursing homes from compelling residents to settle disputes through arbitration as a condition for admission.

The new rule is a victory for the nursing home industry, which had argued against the ban in federal court. As a result of the court case, an injunction was put in place, and the ban never took effect. The new proposal will be published in the Federal Register June 8. 

It would also require all agreements for binding arbitration to be in plain language and to be explained to the resident and their representative in an understandable manner. 

In addition, nursing facilities that resolved disputes with residents through arbitration would need to keep copies of the signed agreement and final decision so they could be inspected by CMS.

Arbitration agreements prevent patients or their families from taking nursing homes to court.

 

Tech: British Prime Minister Theresa May wants tougher internet regulations following the weekend’s deadly terror attack in and around London Bridge.

May called on democratic governments to “reach international agreements that regulate cyberspace to prevent the spread of extremist and terrorism planning.”

In a statement Sunday, she said the government cannot allow technology to serve as a breeding ground for terrorism and extremism.

The Hill’s Ali Breland has more here.

 

LATEST ON PARIS DECISION

President Trump’s decision last week to pull the U.S. out of the Paris climate accords is still reverberating in Washington.

On Monday, a poll found the public opposes the decision by a two-to-one-margin. U.S. governors, mayors and businesses are also insisting they’ll stick with the Paris goals. As are some of Silicon Valley’s biggest names. Secretary of State Rex Tillerson, meanwhile, said Trump isn’t walking away from the environment. 

 

ALSO IN THE NEWS 

Group accuses FCC of trying to stifle pro-net neutrality speech

Supreme Court takes up warrantless use of cellphone data

Transgender rights taking hold in the courts

 

OUTSIDE THE HILL

Most Americans support government regulation to fight climate change. Including in Pittsburgh – The Washington Post 

Marsha Blackburn pushes ‘light touch’ Internet privacy regulation – The Washington Examiner

The opioid crisis changed how doctors think about pain – Vox 

Review of auto standards raises concerns from former EPA officials – Morning Consult

Lawmakers to debate revamping commercial outer space regulations – The Wall Street Journal

 

Send tips, story ideas and pie recipes to lwheeler@digital-stage.thehill.com and follow me on Twitter @wheelerlydia.

Nathaniel Weixel contributed.