House Financial Services Committee Approves Investor Protection Bill

Author:Mr Proskauer Rose LLP's Crisis Response Practice Group
Profession:Proskauer Rose LLP

On November 4, the Financial Services Committee of the House of Representatives approved H.R. 3817, the Investor Protection Act of 2009, by a vote of 4128.

The bill would make wide-ranging reforms of the financial regulatory environment in the United States, including the following measures:

Doubling the funding of the Securities and Exchange Commission over the next five years, providing new enforcement powers to the SEC, and creating two new SEC offices, one of which would examine the causes of major businesses' insolvency; Initiating an independent, comprehensive study of the entire securities industry to identify reforms and further potential improvements to the current regulatory framework; Imposing a new fiduciary duty on financial intermediaries that provide advice to their customers, and harmonizing the fiduciary duties owed by broker-dealers and investment advisers to their clients; Creating a new whistleblower bounty program that will reward individuals whose tips lead to successful SEC enforcement actions; Giving the SEC the power to ban mandatory arbitration clauses in customer contracts in the financial services industry; Giving the Public Company Accounting Oversight Board new examination powers over broker-dealer auditors; and Requiring financial advisers to municipalities to register with the SEC, and permitting the SEC to delegate certain investment adviser enforcement responsibilities to self-regulatory organizations, such as the Financial Industry Regulatory Authority. The bill will now proceed to the full House for a vote, which is expected to take place by the first week of December.

Federal Open Market Committee Announces Factors Influencing Interest Rates Increases On November 4, the Federal Open Markets Committee ("FOMC") released a statement announcing its decision to leave the target federal funds rate unchanged at zero to 0.25 percent. The FOMC stated that "economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period." This statement marks the first time since September 2008 that the FOMC identified the economic conditions that influenced its decision to continue its highly accommodative monetary policy.

The FOMC statement is understood by some analysts to be a signal from the Federal Reserve that absolute economic growth will not be the sole...

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