[StBernard] Financial Services Committee Approves Investor Protection Act

[Westley Annis]

Financial Services Committee Approves Investor Protection Act

Washington, DC - Today, the House Financial Services Committee passed H.R.
3817, the Investor Protection Act, by a vote of 41-28. The legislation is
part of a broader effort to modernize America's financial regulatory system
and was introduced by Rep. Paul E. Kanjorski (D-PA), Chairman of the
Subcommittee on Capital Markets, Insurance, and Government Sponsored
Enterprises.  

"In order to maintain a sound economy, we must improve investor protection
and confidence," said Chairman Kanjorski.  "The Investor Protection Act aims
to achieve these goals while also improving enforcement powers at the U.S.
Securities and Exchange Commission and implementing a fiduciary standard for
broker-dealers and investment advisers to ensure that customers' interests
are at the forefront of investment recommendations.  Our financial system
has failed far too many investors for far too long and we must change
course.  I believe this bill has the capabilities to address many of the
problems we continue to face."

A summary of H.R. 3817 follows:

*        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.

 

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