US Senate passes financial reform bill

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The Senate voted Thursday evening to approve a historic financial regulatory reform bill that would make sweeping changes in how the financial system is regulated.   It is the most far-reaching restraints on big banks since the Great Depression.

That’s a big step forward for Wall Street reform.   Although, the bill would still have to be reconciled with a version the House passed in December, the chances are now good that President Obama soon will be able to sign the legislation into law.    In fact, House Financial Services Committee Chairman Barney Frank, D-Mass., said he expected relatively few disagreements between House and Senate negotiations, and he predicted Obama will have a bill to sign before July 4.    

More specifically, the bill would create a Consumer Financial Protection Bureau within the Federal Reserve, instead of the standalone Consumer Financial Protection Agency that is in the version of the bill that was approved by the House last December.   Public accountants would be exempted from regulation by either the bureau or the agency.

The bill provides the SEC and the Commodity Futures Trading Commission with authority to regulate over-the-counter derivatives.  Derivatives would have to trade over regulated exchanges and cleared through central clearinghouses.

The Sarbanes-Oxley Act would be amended to authorize the Public Company Accounting Oversight Board to share certain information with foreign authorities, and to give the PCAOB the ability to regulate auditors of brokers and dealers.

The bill would also streamline bank supervision by eliminating the Office of Thrift Supervision. The Federal Deposit Insurance Corp. would regulate state banks and thrifts of all sizes and bank-holding companies of state banks with assets below $50 billion.  The Office of the Comptroller of the Currency would regulate national banks and federal thrifts of all sizes and the holding companies of national banks and federal thrifts with assets below $50 billion. The Federal Reserve would regulate bank and thrift holding companies with assets of over $50 billion. The legislation would leave in place the state banking system that governs most community banks.

Hedge funds would be required to register with the SEC as investment advisors and provide information about their trades and portfolios necessary to assess systemic risk. This data would be shared with a systemic risk regulator, and the SEC would report to Congress annually on how it uses this data to protect investors and market integrity.

Shareholders would be given a say on pay with the right to a non-binding vote on executive pay at public companies. The legislation also gives the SEC authority to grant shareholders proxy access to nominate directors, and requires directors to win by a majority vote in uncontested elections. To be listed on an exchange, compensation committees would need to include only independent directors. They would have the authority to hire outside compensation consultants.

Anna Timone (195 Posts)


Comments

  1. The tax changes for hedge funds on interest earned from carry trades will impact the high yielding currencies…

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