Dodd Unveils Omnibus Financial Reform Bill; No Fiduciary Obligation

Senate Banking Committee Chairman Christopher Dodd’s (D-Connecticut) sweeping financial services regulatory reform bill, which he unveiled on March 15, 2010, includes a number of provisions that affect investment advisors. The overhaul bill includes Senator Tim Johnson’s (D-South Dakota) amendment requiring the SEC to study and then create rules regarding the obligations of broker/dealers and investment advisors; requires hedge funds to register with the SEC; and raises the assets threshold for federal regulation of investment advisors from $25 million to $100 million, which would increase the number of advisors under state supervision to 28%.

Wisconsin Democratic Senator Herb Kohl’s amendment that would create an independent oversight board to regulate financial planners is expected to be introduced during mark-up of the reform bill, which is likely to start the week of March 22.

Despite breaking off bipartisan talks on March 11, Dodd said during a press conference on March 15 that his committee will have a reform bill completed this year.

Dodd’s bill would also establish an Office of National Insurance, which creates a new office within the Treasury Department to monitor the insurance industry; would give the SEC and CFTC the authority to regulate derivatives; impose tough new capital and leverage requirements on banks; and create a separate Consumer Financial Protection Agency (CFPA) within the Federal Reserve.