The Dodd-Frank Act's much-debated safeguards for U.S. financial institutions are still being worked out by regulators, but a far less noticed part of the law is already having significant effect.

Securities and Exchange Commission officials say the Dodd-Frank Act's alterations to the "aiding and abetting" standard used to determine whether third parties enabled securities violations is boosting the number of SEC enforcement cases against individuals and improving the SEC's chances of obtaining sanctions.

The Private Securities Litigation Reform Act of 1995 created the aiding and abetting standard by empowering the SEC to pursue securities claims against third parties who have a business relationship with a company that engaged in fraudulent activity and who have had knowledge of the fraud. Previously, claims against third parties were left to private litigation.

The Dodd-Frank Act made several changes to the standard. First, it expanded the instances in which the SEC could bring an aiding and abetting charge to the full range of SEC violations. Previously, the SEC could bring aiding and abetting cases only against investment advisers in connection with exchange trades. The change makes it far easier to bring enforcement actions against so-called secondary actors and gatekeepers. The Dodd-Frank Act specifically authorized the SEC to seek monetary damages in the cases, clearing up some confusion in courts about whether the SEC could seek fines from investment advisers.

Perhaps most importantly, the law dramatically altered the "state of mind" standard for proving a violation. Previously, the SEC had to prove not only that a violation occurred, but that anyone accused of aiding and abetting was aware of the violation and acted "knowingly." The new law lowers the standard of proof. Now the SEC need show only that a person acted either "knowingly" or "recklessly" in regards to another party's violations. The SEC no longer has to demonstrate that a person charged should have had knowledge of a violation -- only that a person, particularly the violator's key advisers, failed to exercise due care to prevent it.

"It allows us to assert violations against lawyers and accounting firms," Merri Jo Gillette, regional director of the SEC's Midwest Regional Office, told an SEC Speaks forum in February.

Gillette said proving that third parties knew of violations had been difficult. Courts had come to view having monitoring systems in place to avoid securities violations as sufficient for meeting the requirement of "good faith" efforts to prevent violations, which made it hard to mount prosecutions successfully.

In 2009 SEC Chairwoman Mary Schapiro, in testimony to the House Financial Services Committee, had urged the changes. "This would close a gap and create consistent remedies that the SEC can seek and eliminates significant limitations on the SEC's ability to pursue serious misconduct," she said.

Rebecca Katz of Bernstein Liebhard LLP has handled a number of whistleblower suits and class actions and is a former enforcement official at the SEC. She says the SEC's new ability to assert officials acted "recklessly" could greatly boost the agency's ability to take on enforcement cases. "It's a looser standard going from 'knowing' to 'reckless,' " she says.

Brian L. Rubin, an attorney in Sutherland Asbill & Brennan LLP's litigation practice group, says the change has "enabled the SEC to charge a wider variety of conduct" and may have already resulted in the SEC's bringing "a lot more enforcement cases." He notes that the SEC can use the threat of aiding and abetting enforcement to build cases against higher-ups or to push for settlement.

It's still too early to quantify the number of cases affected by the change -- enforcement cases can take a long while to develop, and courts are still weighing the new standard's application to older cases -- but the new standard is making it far easier for the SEC to pursue and win cases tied to recent activities, say SEC officials and lawyers.

"The big impact is anecdotal," Rubin says. "It may be a factor in settlements, but you won't know the level of evidence there."

Ira Teinowitz covers financial regulation for The Deal magazine.