CFA Institute Offers “Strong Support” for Key Items in Senate Bill
March 16, 2010
The CFA Institute, the association that administers the CFA exam program worldwide, said today that it supports critical areas of the new Senate Banking Committee bill on financial regulatory reform.
The 1,336-page bill was introduced by Christopher Dodd, D-CT, chairman of the Senate Banking Committee, on Monday. The legislation, which has the support of the Obama administration, would -- among other things -- establish a council to monitor systemic risk and instruct the Federal Reserve to oversee the largest financial institutions, rather than only banks.
The plan would also curb proprietary trading and boost the profile of the municipal bond market by requiring the head of the Securities and Exchange Commission's municipal-securities office to report directly to the agency's chairman.
“Three areas we felt most critical to avoiding a repeat of the recent systemic meltdown are addressed in the new draft,” Kurt Schacht, CFA managing director, said in a statement.
First, he said, the bill contains a “properly structured oversight body” for systemic risk. “We were pleased to see that the Senate bill includes an independent research office that will collect and analyze data to inform the Financial Stability Oversight Council ‘s actions on overseeing systemic risk,” he said.
Second, Schacht said, the group was happy with proposals in the bill that clarify bank regulatory responsibilities, limit proprietary trading risks, and implement more dynamic and preventative margin and capital requirements during changing market conditions. “This -- coupled with legislation that closes the gaps in OTC derivatives regulation and the introduction of a process to reduce the complexity and potential impact of too-big-to-fail institutions -- shows that the investor perspective has been given strong consideration for the first time in many years,” he said.
The group added, however, that an important test for lawmakers will be whether they can hold the line on these investor protections.
“We expect that banking and other special interests will do their level best to strip many of these important protections from the final bill,” Schacht said. “For example, we are troubled to see the Senate legislation propose only a study on the need for a single fiduciary duty standard. We encourage Senators to keep investors’ interests in mind at all time and resolve this issue by adopting a single standard for providers of investment advice.”
In May 2009, the Investors’ Working Group, co-sponsored by CFA Institute and the Council of Institutional Investors, made a series of recommendations on financial regulatory reform, including strengthening and reinvigorating existing federal agencies responsible for policing financial institutions; filling in gaps in the regulatory architecture and in authority over certain financial institutions, investment firms, and products; and moving all standardized OTC derivative contracts to regulated exchanges and central clearinghouses.
