Senate Democrats were successful on Thursday, May 20, in invoking cloture on Senator Christopher Dodd's (D-Connecticut) financial services reform bill, S. 3217.
Further debate on current amendments is now limited to 30 hours and a halt will be placed on the introduction of new amendments. Washington observers are confident that the Senate will move to a final vote soon.
The first attempt at invoking cloture on May 19 failed, with a vote of 57-42. Senate Democrats garnered the 60 votes that were needed on Thursday to move the bill forward. Three Republicans joined the Democratic majority in favor of ending the debate. Two Democrats voted with 38 Republicans in opposition to finalizing the bill. In an odd twist, freshman Senator Scott Brown (R-Massachusetts) provided the decisive vote for the Democrats.
After the vote was called, Senate Majority Leader Harry Reid (D-Nevada) said, "It's been hard to get to this point. But it was a good debate."
None of the amendments involving fiduciary duty have been debated on the Senate floor. Washington observers say that it is possible that fiduciary amendments could be added to the manager's amendment, which is being crafted by Dodd and Senator Richard Shelby of Alabama, ranking GOP member on the Senate Banking Committee.
The American Association of Retired Persons (AARP) joined May 19 the North American Securities Administrators Association (NASAA) and the Consumer Federation of America (CFA) in opposing the Harkin/Johanns/Leahy amendment (S 3920) to Dodd's bill, which the groups say would deprive investors in indexed annuities of the strong protections afforded by our nation's securities laws. The amendment, the groups say, "seeks to reverse the SEC's Rule 151A, which would subject indexed annuities to regulation as securities. Adopted by the SEC in 2008, the rule was later challenged by the insurance lobby. Although the U.S. Court of Appeals for the District of Columbia Circuit upheld the legal foundation for Rule 151A, the SEC has agreed to delay the rule's effective date to 2013."
"The Harkin Amendment would overturn the SEC rule, which is designed to provide disclosure, suitability, and sales practice protections afforded by state and federal securities laws," AARP wrote in a letter to the Senate. "If this amendment is adopted, the industry will be encouraged to develop hybrid products in the future specifically designed to evade a regulatory regime designed to protect consumers."
In a May 14 letter to the Senate, NASAA and CFA said regulating equity-indexed annuities as securities "is long overdue and vitally important to our nation's investors."
Meanwhile, a bipartisan amendment that's designed to ease restrictions in the financial reform bill for accredited investors, which was sponsored by Senators Kit Bond (R-Missouri) and Senate Banking Committee Chairman Christopher Dodd (D-Connecticut) and co-sponsored by Senators Mark Warner (D-Virginia), Scott Brown (R-Massachusetts), Maria Cantwell (D-Washington) and Mark Begich (D-Alaska), was adopted by voice vote May 17 as part of Dodd's financial reform bill.
The amendment, the Senators say, "promotes small business startups by speeding and increasing the availability of essential seed capital from qualified investors. Specifically, the Bond, Dodd, Warner, Brown, Cantwell and Begich amendment eliminates the language in the underlying bill that required a 120 day Securities and Exchange Commission review period for investors that prove an annual income in excess of $200,000 and net worth totaling more than $1 million."
"Given today's rather anti Wall Street sentiment, it is refreshing to see that capital raising, especially for small businesses, is properly recognized for having great value to Main Street," says Michael Tannenbaum, a partner in the law firm of Tannenbaum Helpern Syracuse & Hirschtritt in New York. "Job creation must be given a high priority these days and this clearly is a step in the right direction."
The Senators say that "promoting investments in startups is particularly important as the nation's unemployment rate continues to hover just under 10% and the necessity for small business job creation remains critical. The amendment also seeks to promote integrity in private placements and protect would-be investors and the American public from fraud by prohibiting felons and other known bad-actors from seeking to raise investment and capital."