Unveiling its proposal for financial services reform on June 17, the Obama Administration is calling for reforms in five key areas–including establishing a fiduciary duty for broker/dealers offering investment advice as well as harmonizing the regulation of investment advisors and broker/dealers. The proposal also calls for all advisors to hedge funds to register with the SEC, but it does not include establishing a self-regulatory organization (SRO) for advisors.
David Tittsworth, executive director of the Investment Adviser Association (IAA) in Washington, says the fact that the Administration’s white paper does not call for the formation of an SRO for advisors “is good news.” But even though the white paper calls for a fiduciary duty for B/Ds and harmonizing the rules for advisors and brokers, “the devil is still in the details,” he says. “My understanding is that there will be some sort of legislation that will accompany this white paper at some point. The debate has begun now.”
The Senate Banking Committee is holding hearings on the White Paper, with Treasury Secretary Timothy Geithner as the sole person testifying on June 18. A spokesman for Rep. Barney Frank’s office, chairman of the House Financial Services Committee, says that now that Obama’s plan has been revealed the Committee will “start a robust series of hearings” beginning the week of June 22 that will extend into July with “hopes of a mark-up [on legislation] at the end of July.”
The Administration’s proposal also includes creating a new Federal Services Oversight Council of prudential regulators to identify emerging systemic risks, and expanding the Federal Reserve’s powers so that it can supervise all firms that could pose a threat to the nation’s financial stability. A new National Bank Supervisor would also be formed to supervise all federally chartered banks.
The Obama proposal would also create the Office of National Insurance within Treasury to gather information, develop expertise, negotiate international agreements, and coordinate policy in the insurance sector.