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Congresswoman Carolyn Maloney serves as ranking member of the subcommittee.
The subcommittee reviews and authors laws and programs related to the U.S. capital markets, the securities industry, the insurance industry generally (except for health care), and government-sponsored enterprises, such as Fannie Mae and Freddie Mac. It also oversees the Securities and Exchange Commission and self-regulatory organizations, such as the New York Stock Exchange and the NASD, that police the securities markets.
The United States has the largest and most efficient capital markets in the world, providing the investment needed for businesses worldwide to grow and flourish. Since the 107th Congress, the Financial Services Committee has had responsibility for overseeing U.S. policy in the capital markets and for ensuring the transparency and integrity of those markets. Millions of Americans either directly or indirectly invest their savings and retirement funds in the capital markets. Unlike accounts at banks and other depository institutions, these investments are not insured by the federal government. In light of these facts, the Democratic Caucus has sought to promote policies that will provide the greatest possible investor protection and ensure all investors are treated fairly. The Committee also has oversight responsibility for the insurance industry and for a number of government-sponsored enterprises.
The complete jurisdiction of the subcommittee includes:
(i) securities, exchanges, and finance;
(ii) capital markets activities, including business capital formation and venture capital;
(iii) activities involving futures, forwards, options, and other types of derivative instruments;
(iv) the Securities and Exchange Commission;
(v) secondary market organizations for home mortgages, including the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and the Federal Agricultural Mortgage Corporation;
(vi) the Federal Housing Finance Agency; and
(vii) the Federal Home Loan Banks.
Wall Street Reform
In the 111th Congress Chairman Kanjorski introduced four major pieces of legislation that are included in H.R. 4173, Wall Street Reform and Consumer Protection Act of 2009. The bills aim to better protect investors, enhance credit agency regulation, force the registration of the advisors to hedge funds and private equity pools, and create a federal insurance office.
Summaries of the four pieces of regulatory reform legislation drafted by Chairman Kanjorski follow:
Investor Protection Act - H.R. 3817
- 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 personalized 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.
Accountability and Transparency in Rating Agencies Act - H.R. 3890
- Stronger than the Administration's Plan on Rating Agencies. The Accountability and Transparency in Rating Agencies Act builds on the initial credit rating agency legislation proposed by the Administration in that it:
- Mitigate conflicts of interests. The legislation also contains numerous new requirements designed to mitigate the conflicts of interest that arise out of the issuer-pays model for compensating NRSROs. Additionally, the bill significantly enhances the responsibilities and accountability of NRSRO compliance officers to address conflicts of interest issues.
- Greater Public Disclosure. As a result of the bill, investors will gain access to more information about the internal operations and procedures of NRSROs. In addition, the public will now learn more about how NRSROs get paid.
- Revolving-Door Protections. When certain NRSRO employees go to work for an issuer, the bill requires the NRSRO to conduct a 1-year look-back into the ratings in which the employee was involved to make sure that its procedures were followed and proper ratings were issued. The bill also requires NRSROs to report to the SEC, and for the SEC to make such reports public, the names of former NRSRO employees who go to work for issuers.
Private Fund Investment Advisers Registration Act - H.R. 3818
- Everyone Registers. Sunlight is the best disinfectant. By mandating the registration of private advisers to 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 - H.R. 2609
- 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, also known as 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 financial markets are global. The Federal Insurance Office will therefore provide a unified voice on insurance matters for the United States in global deliberations. The Federal Insurance Office and the United States Trade Representative will share the authority to enter into and negotiate agreements with foreign entities.
- Promote Financial System Stability. Insurance accounts for 10 percent of the assets of the financial system and employs almost 40 percent of the employees in the financial services industry. Having a strong knowledge base at the Federal level of government will be instrumental in helping to promote stability in our financial system.