Obama Administration Introduces SEC Legislation

t of its effort to reform the financial system, the Obama administration has delivered proposed legislation meant to strengthen the Securities and Exchange Commission's (SEC) authority to protect investors. The legislation outlines steps to establish consistent standards for individuals and companies providing investment advice about securities, to improve the timing and the quality of disclosures, and to require accountability from securities professionals. The legislation would also make permanent the Investor Advisory Committee that the SEC recently created to advise on the SEC's regulatory priorities. According to a Treasury statement, the legislation would give the SEC authority to require a fiduciary duty for any broker, dealer or investment adviser who gives investment advice about securities, aligning the standards based on activity, instead of being based on legal distinctions that the Treasury says are no longer meaningful. The SEC would also be empowered to examine and ban forms of compensation that encourage financial intermediaries to steer investors into products that are profitable to the intermediary but are not in the investors' best interest. The administration's legislation would give the SEC authority to prohibit mandatory arbitration clauses in broker-dealer, municipal securities dealer and investment advisory agreements. The Treasury says such arbitration may unjustifiably undermine investor interests. The SEC would also have the authority to regulate the quality and timing of disclosures. Currently, most fund disclosures are not required to be delivered to investors until after a transaction is complete, the department adds. On the topic of accountability, the administration's proposal expands protections for whistle-blowers and harmonizes liability standards so that the SEC can pursue those who aid and abet securities fraud. The SEC currently has the ability to pursue actions against those who aid and abet securities fraud in cases brought under the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940, but not under the Securities Act of 1933 nor the Investment Company Act of 1940. The administration's legislation looks to close this gap to create consistent remedies that the SEC can seek and eliminates significant limitations on the SEC's ability to pursue serious misconduct. SOURCE: T


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