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Congressman Kanjorski Releases Draft Legislation

Written by Christine Lazaro, Esq.

Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises, Paul E. Kanjorski (D-PA), released discussion drafts of three pieces of legislation on October 1st. The drafts include the Investor Protection Act, the Private Fund Investment Advisers Registration Act, and the Federal Insurance Office Act.

In a press release, Chairman Kanjorski stated “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.”

The press release summarized the three drafts as follows:

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.

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.

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.

For the full press release, including links to the draft legislation, click here.

Comments (1)

I am going through an absolute nightmare arbitration claim with FINRA, the Financial Industry Regulatory Authority. Paid for by the industry, for the industry. My hearing has been delayed time and time again. We had an arbitrator who had fraudulent degrees - a MA and PhD from a degree mill. I had to PUSH to get this guy off the panel– FINRA was going to let him stay as the chair — and to the best of my knowledge, he is still a FINRA arbitrator and chair! so, someone else could get him next… the respondent filed a retaliatory lawsuit against me - that was dismissed and he was sanctioned - but i spent tens of thousands of dollars fighting and wasted time with it. Check out my blog, http://www.myfinraclaim.com to read my story. and what is wrong with mandatory arbitration clauses. and FINRA - this is the only place for relief for investors and associated persons. and it is completely industry driven and run. it’s shameful… it’s time for congress to take over finra and have real regulation of the financial services industry… the commercials they are running? a joke. i haven’t been able to get a job in 19 months because of this - and they want me to wait another 4-6 months to get my day in court. Now the arbitrators have issued a gag/confidentiality order that is against FINRA code and violates my first amendment rights.

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This page contains a single entry from the blog posted on October 1, 2009 10:41 PM.

The previous post in this blog was In Dorozhko, the Second Circuit Maintains Section 10(b)’s Flexibility.

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