Financial Crisis News Center

Chamber of Commece Opposes Waters Amendment on Shareholder Access

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

Legislation passed by the House Financial Services Committee would authorize the SEC to implement shareholder access to management’s proxy card to nominate directors for election to the board. The Waters Amendment to the Investor Protection Act would authorize the SEC to implement rules and procedures granting shareholders the opportunity to nominate at least one director to a corporation’s board of directors, a right known as proxy access. In the view of Rep. Waters, the amendment was needed because, without it, the SEC would have most likely faced a lawsuit from corporations and their industry groups alleging that the Commission lacked the authority to grant shareholders this right. The SEC proposes allowing shareholders to include their nominees for director in the company's proxy materials if they have been shareholders of the company for at least one year and satisfy a minimum holdings test based on the company’s market value.

In a letter to Committee Chair Barney Frank, the US Chamber of Commerce criticized the Waters Amendment as federalizing corporate law with a one-size-fits-all approach when what is needed is a flexible state-based approach that allows shareholders and the board to choose a governance structure that works best for the company. Delaware has enacted legislation clarifying the authority of companies and their shareholders to adopt proxy access and proxy reimbursement bylaws, noted the Chamber, and an American Bar Association committee is addressing similar amendments to the Model Business Corporation Act on which 30 state corporate statutes are based. Coming at this time, said the Chamber, the Waters Amendment would deprive shareholders of existing rights and weaken existing corporate governance structures. Moreover, the Waters Amendment would disenfranchise individual investors and empower special interests.

House Financial Services Committee Passes Legislation Reforming SEC, PCAOB and SIPC Oversight

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter; and CCH Derivatives Regulation Law Reporter.

The House Financial Services Committee has passed legislation reforming the SEC to strengthen its powers, better protect investors, and efficiently and effectively regulate the securities markets. The failures to detect the Madoff and Stanford Financial frauds demonstrated deep deficiencies in the existing securities regulatory structure. The Act doubles the authorized funding for the SEC over the next five years and provides dozens of new enforcement powers and regulatory authorities. Thus, the SEC will be able to enhance its enforcement programs and gain the tools needed to better protect investors and police the markets. The Investor Protection Act, HR 3817, also authorizes the SEC to collect user fees from advisers to cover the costs of compliance examinations and investigations.

Information Sought on FHA's Financial Health

This story appeared in Bank Digest.

Oversight and Government Reform Committee Ranking Member Darrell Issa, R-Calif., and Financial Services Committee Ranking Member Spencer Bachus, R-Ala., sent a letter to Housing Secretary Shaun Donovan requesting information on the financial health of the Federal Housing Administration in light of an announcement by the FHA regarding its annual independent actuarial study that is expected to show the capital reserve ratio dropping below the congressionally-mandated threshold of two percent. Among the items Issa and Bachus request are: data supporting claims that the FHA will not need to ask Congress for any funding; records and communications between HUD or FHA employees related to the decline in FHA's reserve fund; and complete explanation of the Administration's plan to prevent the need for any taxpayer bailout of FHA.

Rep. Bachus: Time to End the Bailouts

This story appeared in Bank Digest.

During consideration of bailout authority legislation, House Financial Services Committee Ranking Member Spencer Bachus, R-Ala., stated, “The Committee Print of the ‘Financial Stability Improvement Act’ grants unprecedented authorities to the executive branch to expand the government's ‘too big to fail’ policies of the past few years. Regardless of the nomenclature used to camouflage this fact, the provisions of this proposed legislation will give the government practically unlimited power to continue to pour taxpayers’ money into failed businesses whose misguided schemes devastated our economy last year. This cannot continue. It is time, once and for all, to end the bailouts.”

Legislation Still Leaves Investors Without Protections, Says Rep. Bachus

This story appeared in Bank Digest.

Following passage of the Investor Protection Act of 2009, Rep. Spencer Bachus, R-Ala., the Ranking Member of the House Financial Services Committee issued a statement noting that “Although there are a number of positive reforms in the bill, including provisions to exempt small companies from Section 404 of Sarbanes-Oxley, these reforms are overshadowed by the bill's failure to fundamentally reform the [Securities and Exchange Commission].” Bachus added, “The financial crisis demonstrated the need to reform the SEC in order to address the systemic failures at the agency. Unfortunately, dramatically increasing the SEC's taxing authority without fixing the agency's outdated, ineffective, and siloed structure, will still leave investors without the protections they deserve.”

House Passes Expedited Credit Card Reform Bill

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

The House of Representatives voted 331 to 92 on November 4 in favor of H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009, which would speed up the effective date of credit card reform legislation from Feb. 22, 2010, to immediately upon signing of the bill.

The bill was introduced in reaction to reports that credit card companies were abusing the grace period by altering rates and terms after President Obama signed reform legislation in May. A recent report from The Pew Charitable Trusts found that advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks’ cost of lending declined.

Investor Protection Act Passes House Committee

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

Legislation passed Nov. 4, 2009, by the House Financial Services Committee would double the Securities and Exchange Commission (SEC) budget over the next five years, while ramping up the agency’s enforcement powers and regulatory authorities.

H.R. 3817, the Investor Protection Act, introduced by Rep. Paul Kanjorski, D-Pa., passed by a vote of 41-28. “Our financial system has failed far too many investors for far too long and we must change course,” Kanjorski said.

House Passes Expedited Credit Card Reform Bill

This story appeared in Bank Digest.

The House of Representatives voted 331 to 92 on Nov. 4, 2009, in favor of H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009, which would speed up the effective date of credit card reform legislation from Feb. 22, 2010, to immediately upon signing of the bill. The bill was introduced in reaction to reports that credit card companies were abusing the grace period by altering rates and terms after President Obama signed reform legislation in May. A recent report from The Pew Charitable Trusts found that advertised credit card interest rates rose an average of 20 percent in the first two quarters of 2009, even as banks’ cost of lending declined. H.R. 3639 includes a provision that allows any card issuer to be exempt from the earlier effective date if they adopt a moratorium on interest rate increases on current balances and new balances incurred between the date of enactment and Feb. 22, 2010. The bill would also exempt small credit card issuers that frequently outsource computer programming functions, and gift card providers.

http://www.house.gov/apps/list/press/financialsvcs_dem/presscredit_110409.shtml

Investor Protection Act Passes Financial Services Committee

This story appeared in Bank Digest.

Legislation passed Nov. 4, 2009, by the House Financial Services Committee would double the Securities and Exchange Commission budget over the next five years, while ramping up the agency’s enforcement powers and regulatory authorities. H.R. 3817, the Investor Protection Act, introduced by Rep. Paul Kanjorski, D-Pa., passed by a vote of 41-28. H.R. 3817 would require broker dealers and investment advisors to adopt a fiduciary standard putting their customers’ interests first. It also would establish a whistleblower bounty program, which would offer rewards to individuals whose tips result in successful enforcement actions. In addition, the bill would allow the SEC to bar mandatory arbitration clauses in customer contracts. The legislation also includes a provision that would exempt small businesses with a market capitalization of $75 million or less from complying with the audit requirements of the Sarbanes Oxley Act.

http://www.house.gov/apps/list/press/financialsvcs_dem/pressipa_100409.shtml

Key House Committee Passes Credit Agency Reform Legislation

By James Hamilton, J.D., LL.M., Principal Analyst, CCH Federal Securities Law Reporter and CCH Derivatives Regulation Law Reporter.

The House Financial Services Committee has passed bi-partisan legislation reforming the governance and operations of credit rating agencies. The Accountability and Transparency in Rating Agencies Act, HR 3890, enhances the accountability of credit rating agencies by clarifying the ability of individuals to sue such agencies. The Exchange Act is amended to provide that, in an action for money damages against a rating agency, it is enough for pleading any required state of mind that the complaint state with particularity facts giving rise to a strong inference that the rating agency knowingly or recklessly violated the securities laws. In addition, statements made by rating agencies will not be deemed forward looking statements for purposes of the Exchange Act’s safe harbor.