Kanjorski Bill Would Require a Public Majority on MSRB

WASHINGTON — The 15-member Municipal Securities Rulemaking Board would be required to have a majority of public members under draft legislation released by Rep. Paul Kanjorski, D-Pa., Thursday.

Kanjorski, who chairs the House Financial Services Subcommittee on capital markets, released “discussion drafts” of three regulatory reform bills, one of which would dramatically increase funding, enforcement, and regulatory powers for the Securities and Exchange Commission as well as vastly reshape the composition of the MSRB.

Specifically, the 114-page draft Investor Protection Act would amend a section of the Securities Exchange Act of 1934 to require the board to consist of “a majority of public representatives,” at least one of which would be a representative of investors and another a representative of issuers. The board also would be required to have at least one bank dealer and at least one securities dealer.

An SEC staff official said last week that the commission would seek such legislation, to make the board’s composition more like other self-regulators.

Currently only five members, or ­one-third of the board, are public members, including one representative of the issuer community and one representative of ­investors.

The other 10 seats are equally divided between bank-dealer representatives and securities dealer representatives.

The same draft bill would double authorized funding for the SEC over five years, strengthen its powers, and better protect investors by calling for a high caliber independent group to comprehensively study the entire securities industry to identify needed reforms. For fiscal 2009, which ended Tuesday, the SEC’s budget was $960 million. Under a continuing resolution that President Obama signed Thursday, the federal government is operating at the same budgetary levels for the next month.

The other two draft bills would require registration of private advisers to hedge funds and create a Federal Insurance Office that would provide national policymakers with access to the information and resources needed to respond to crises and mitigate systemic risk.

“With these three bill we will address many of the shortcomings and loopholes laid bare by the current financial crisis,” said Kanjorski, chairman of the House Financial Services Committee’s capital markets panel.