Obama administration seeks boost to U.S. SEC investor protection

July 10, 2009

SEC headquarters

WASHINGTON, July 10 (Reuters) – The Obama administration on Friday proposed legislation to strengthen the Securities and Exchange Commission’s investor protection authority, including the power to ban certain forms of compensation for brokers and investment advisers.
The SEC would get authority under the bill to establish consistent fiduciary standards for broker dealers and investment advisers and could ban bonuses or other forms of compensation for financial intermediaries that encourage them to steer investors into products that are not in the investors’ best interests.
The bill, one of several financial regulatory reform bills sent by the U.S. Treasury to Congress this summer, also aims to improve disclosures to investors, close gaps in standards and pay whistleblowers for information that can be used in enforcement actions.
The bill comes just days after the administration proposed a new agency that would get sweeping powers to protect consumers on many financial products that fall outside of the SEC’s jurisdiction.
The bill would give the SEC authority to require delivery of disclosures and prospectuses before investors buy into mutual funds, not after as is typically the case currently. The SEC could require a concise summary prospectuses and a simple disclosure form showing fund costs.
The SEC also would gain authority to establish a fund to pay whistleblowers for information leading to enforcement actions that result in significant financial awards. The money would come from penalties paid that are not distributed to investors.
“This authority will encourage insiders and others with strong evidence of securities law violations to bring that evidence to the SEC and improve its ability to enforce the securities laws,” The Treasury said in a summary sheet on the legislation.
A new SEC investor advisory committee, which examines new products, trading strategies, fee structures and disclosures, would be made permanent under the legislation. (Reporting by David Lawder; Editing by Theodore d’Afflisio)

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