[StBernard] Kanjorski Releases Financial Reform Drafts on Investor Protection, Private Advisor Registration, and Federal Insurance Office

[Westley Annis]

KANJORSKI RELEASES FINANCIAL REFORM DRAFTS ON 

INVESTOR PROTECTION, PRIVATE ADVISER REGISTRATION, 

AND FEDERAL INSURANCE OFFICE

 

Capital Markets Chairman Addresses Key Pieces of Financial Regulatory Reform


Through Comprehensive Bills and Administration Input

 

WASHINGTON - Congressman Paul E. Kanjorski (D-PA), Chairman of the House
Financial Services Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises, today released discussion drafts of three
pieces of legislation aimed at tackling key parts of reforming the
regulatory structure of the U.S. financial services industry.  The draft
bills include the Investor Protection Act, the Private Fund Investment
Advisers Registration Act, and the Federal Insurance Office Act.  

 

Chairman Kanjorski introduced bipartisan legislation earlier this year and
in the last Congress to create a federal insurance office, which was backed
by the Obama Administration and included in its proposals for financial
services regulatory reform.  Congresswoman Judy Biggert (R-IL), Ranking
Member of the House Financial Services Subcommittee on Oversight and
Investigations, joined as an original co-sponsor of the 2009 bill when it
was first introduced.  Chairman Kanjorski also worked to revise and
significantly enhance the Investor Protection Act and the Private Fund
Investment Advisers Registration Act proposed by the Obama Administration
this summer.

 

"Today, we take another step forward in overhauling the regulatory structure
of the financial services industry," said Chairman Kanjorski.  "With these
three bills we will address many of the shortcomings and loopholes laid bare
by the current financial crisis.  The Investor Protection Act will better
protect investors and increase the funding and enforcement powers of the
U.S. Securities and Exchange Commission.  We must ensure that investor
confidence continues to increase for the betterment of our financial system.


 

"Additionally, we need to ensure that everyone who swims in our capital
markets has an annual pool pass.  The Private Fund Investment Advisers
Registration Act will force many more financial providers to register with
the SEC.  Many financial firms skirt government oversight and get away like
bandits, but now the advisers to hedge funds, private equity firms, and
other private pools of capital would become subject to more scrutiny by the
SEC.

 

"Finally, bipartisan legislation which I first introduced in the last
Congress to create a federal insurance office to fill a gap in the federal
government's knowledge base on financial activities.  For several years,
including in this Congress, I have worked to advance bipartisan legislation
to address this issue, and I am pleased that the Administration also
understands the need for this office and welcome the refinements they
suggested to my bill."

 

Summaries of the three legislative discussion drafts follow:

 

Investor Protection Act

*        Protecting Investors and Righting Wrongs.  The financial crisis
exposed the perils of deregulation.  The Investor Protection Act will right
these wrongs by reforming the Securities and Exchange Commission (SEC) to
strengthen its powers, better protect investors, and efficiently and
effectively regulate our securities markets.

*        Comprehensive Securities Review and Reorganization.  The failures
to detect the Madoff and Stanford Financial frauds demonstrate deep
deficiencies in our existing securities regulatory structure.  An
expeditious, independent, comprehensive study of the entire securities
industry by a high caliber body will identify reforms and force the SEC and
other entities to put in place further improvements designed to ensure
superior investor protection.

*        Enhanced SEC Enforcement Powers and Funding.  By doubling the
authorized funding for the SEC over 5 years and providing dozens of new
enforcement powers and regulatory authorities, the SEC will be able to
enhance its enforcement programs and gain the tools needed to better protect
investors and police today's markets.

*        Fiduciary Duty.  Every financial intermediary who provides advice
will have a fiduciary duty toward their customers.  Through a harmonized
standard, broker-dealers and investment advisers will have to put customers'
interests first.

*        Whistleblower Bounties.  A whistleblower bounty program will create
incentives to identify wrongdoing in our securities markets and reward
individuals whose tips lead to successful enforcement actions.  With a
bounty program, we will effectively have more cops on the beat in our
securities markets.

*        Ending Mandatory Arbitration.  Because mandatory arbitration has
limited the ability of defrauded investors to seek redress, the SEC will
gain the power to bar these clauses in customer contracts.

*        Closing Loopholes and Fixing Faulty Laws.  The Madoff fraud
revealed that the Public Company Accounting Oversight Board lacked the
powers it needed to examine the auditors of broker-dealers.  The $65 billion
Ponzi scheme also exposed faults in the Securities Investor Protection Act,
the law that returns money to the customers of insolvent fraudulent
broker-dealers.  The Investor Protection Act closes these loopholes and
fixes these shortcomings.

 

Click here
<http://www.house.gov/apps/list/press/financialsvcs_dem/investor_protection_
act_draft.pdf>  to view the draft Investor Protection Act.

 

Private Fund Investment Advisers Registration Act

*        Everyone Registers.  Sunlight is the best disinfectant.  By
mandating the registration of private advisers to hedge funds and other
private pools of capital, regulators will better understand exactly how
those entities operate and whether their actions pose a threat to the
financial system as a whole.

*        Better Regulatory Information.  New recordkeeping and disclosure
requirements for private advisers will give regulators the information
needed to evaluate both individual firms and entire market segments that
have until this time largely escaped any meaningful regulation, without
posing undue burdens on those industries.

*        Level the Playing Field.  The advisers to hedge funds, private
equity firms, single-family offices, and other private pools of capital will
have to obey some basic ground rules in order to continue to play in our
capital markets.  Regulators will have authority to examine the records of
these previously secretive investment advisers.

Click here
<http://www.house.gov/apps/list/press/financialsvcs_dem/private_advisers_act
_draft.pdf>  to view the draft Private Fund Investment Advisers Registration
Act.

 

Federal Insurance Office Act

*        Federal Insurance Expertise.  Insurance plays a vital role in the
smooth and efficient functioning of our economy, but the credit crisis
highlighted the lack of expertise within the federal government regarding
the industry, especially during the collapse of American International Group
(AIG) and last year's turmoil in the bond insurance markets.  A Federal
Insurance Office will provide national policymakers with access to the
information and resources needed to respond to crises, mitigate systemic
risks, and help ensure a well functioning financial system.

*        International Coordination.  Although America's insurance markets
still operate on a state-by-state basis, today's markets are global.  The
Federal Insurance Office will therefore provide a unified voice on insurance
matters for the United States in global deliberations.

Click here
<http://www.house.gov/apps/list/press/financialsvcs_dem/foi_ains_draft.pdf>
to view the draft Federal Insurance Office Act

 

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