Due Process Restoration Act – An “Astoundingly Hypocritical” Bill by AFR
The House Financial Services Committee will take up a disingenuous piece of special-interest legislation today. In a joint letter, seven organizations urge committee members to reject HR 3798, the so-called “Due Process Restoration Act.” This bill would reinforce a two-tiered justice system, making it harder for the Securities and Exchange Commission (SEC) to hold brokerage and investment companies accountable for securities law violations, even when those same firms deny basic due process to their investors and customers through forced arbitration.
“The aim of this legislation is clear: to extend special legal protections to those charged with securities law violations by the SEC,” the six organizations say. “Like other federal agencies, the SEC has authority to bring administrative proceedings against entities that violate federal securities law, in addition to civil actions. HR 3798 would allow respondents in SEC administrative proceedings to unilaterally terminate those proceedings, leaving the SEC to either re-file in federal court or drop the charges. It would also significantly raise the burden of proof in administrative proceedings to require the SEC show clear and convincing evidence that the company violated the law – a significantly greater burden than the civil standard of a preponderance of the evidence.
“These special protections are unnecessary. Respondents in SEC hearings enjoy robust opportunities for discovery, a public hearing, and a decision made by a neutral administrative law judge with subject matter expertise. When respondents are found to have violated the law, they are entitled to two full appeal processes, including a review in federal court.
As the letter goes on to observe, “Many SEC-regulated companies that would benefit from this bill use forced arbitration in their standard form contracts – fine print used to block harmed parties from vindicating their rights in court, no matter how egregious the wrong. It is astoundingly hypocritical to seek still further extraordinary legal protections for companies accused of wrongdoing while the same companies refuse to grant their own customers the basic legal right to access the courts.”
AFR, Public Citizen, and the other undersigned organizations voice support for an amendment offered by Representatives Keith Ellison (D-Minn.) and Stephen Lynch (D-Mass.), which, they point out, “highlights this hypocrisy by rendering HR 3798’s special protections inapplicable to respondents that use forced arbitration against consumers and investors.”
“HR 3798 widens the gulf between everyday Americans and monied interests” the letter concludes. “To truly restore due process rights for all Americans, members should oppose HR 3798, and also, as we have previously urged, support legislation restricting the use of forced arbitration, including HR 1098, the Investor Choice Act, and HR 2087, the Arbitration Fairness Act.”
The full letter is attached. The co-signers are:
- Americans for Financial Reform
- Public Citizen
- Center for Justice and Democracy
- Consumer Action
- Consumers for Auto Reliability and Safety
- Main Street Alliance
- National Association of Consumer Advocates