WASHINGTON – Senate Banking Committee chairman Christopher Dodd, D-Conn., today introduced a massive financial regulatory reform bill that would require the head of the Securities and Exchange Commission’s municipal securities office to report directly to the SEC chairman, thereby significantly raising the profile of the muni market at the commission.
The bill also would require municipal financial advisers, swap advisers and investment brokers to register with the SEC and comply with rules issued by the Municipal Securities Rulemaking Board.
It also would require the MSRB to have a majority of investors and public members.
The bill would create a new Office of Credit Ratings at the SEC without its own compliance staff and the authority to fine the agencies. The SEC would be required to examine nationally recognized statistical ratings organizations at least once a year and make key findings public. The rating agencies would have to disclose their methodologies, their use of third parties for due diligence efforts and their rating track records. Their compliance officers would be prohibited from working on ratings, methodologies or sales. Investors would be able to sue rating agencies for a knowing or reckless failure to conduct a reasonable investigation of the facts or to obtain analysis from an independent source. Regulators would have to remove unnecessary references to NRSROs ratings in their regulations.
The SEC would be self-funded and would no longer be subject to the annual appropriations process. In addition, the bill would create a whistleblower program within the SEC that would reward whistleblowers with up to 30% of the funds recovered from information they provided. The bill would require the commission to study whether brokers who give investment advice should be held to the same fiduciary standard as investment advisers and should have to act in their clients’ best interest.
Dodd said he expects the committee will vote on the bill next week.
