Want Great Returns? Win a Seat in Congress.

Stocks held by members of the U.S. Congress out-earn the market - are the above-average returns the result of biased voting and insider trading?

Congress Works to Prevent Elder Financial Fraud

New bills aimed at protecting senior citizens from investment fraud have been making the rounds in both the House and the Senate.

Is Your Adviser a “Registered Investment Adviser” or a “Broker-Dealer”? (The Answer Matters)

SEC has submitted a recommendation to Congress to adopt a "universal fiduciary duty" that would include any financial professional.

SEC Makes Recommendations on How to Improve Advisor Oversight

A stronger, better regulatory system for financial advisors was one of the items for improvement listed in the 2010 Dodd-Frank financial reform law. The law instructed the SEC to study the situation and to provide Congress with recommendations for improvement. As reported in a Jan. 23 InvestmentNews article, the SEC delivered the requested report late last Wednesday (“SEC offers 3 options for RIA oversight”). According to the article, the SEC offered three options for improved regulations: #1. Congress could authorize the SEC to impose fees on advisors that would be used to fund the SEC’s examination and enforcement efforts. The new law requires the SEC to begin monitoring advisers to hedge funds and private-equity funds - a task that the SEC cannot do effectively with its current resources. The Commission says an increase in fees could help fill the funding holes. #2. Congress could allow the SEC to designate one or more of the self-regulatory organizations to oversee advisors. The SEC study makes it clear that a lack of funding is a serious threat to the SEC’s ability to effectively examine all investment advisors. If Congress prefers not to authorize the imposition of fees on advisors, the establishment of a separate agency to take on the responsibility of conducting the examinations may be a good option. #3. Congress could grant FINRA the power to expand its oversight to include registered investment advisors of dually registered firms (those who have both advisors and broker-dealers). While this option is rife with controversy, it also has many vocal supporters. None of the recommendations is without its industry critics, and debate over which course of action is the best will likely continue for some time. About our law firm: The Ohio-based law firm of David P. Meyer & Associates represents clients who have been harmed by investment fraud. Contact us toll-free at 1.866.827.6537 for more information.

Agreement Reached to Reconcile Financial Reform Bill

Early Friday morning, after weeks of negotiations, a House-Senate committee reached a reconciliation agreement on the financial reform bill. The agreed upon bill is broad in scope and includes, among other provisions: new consumer protections, increased federal oversight of banks, and changes to how companies can trade derivatives. The bill also creates a new, 10-member council of regulators, led by the Treasury Secretary, whose job will be to monitor threats to the financial system, according to the Associated Press.

Senate Passes Financial Reform Bill

Last Thursday night, the U.S. Senate passed The Restore American Financial Stability Act, which seeks to implement financial reforms, curb abusive lending practices, and limit risk-taking by large institutions.

Proposed Bill Would Include Criminal Penalties for Broker-Dealers Who Violate Fiduciary Standards

Currently pending before the U.S. Senate is a proposed amendment, Specter Amendment SA 3806, to the Wall Street reform legislation to extend punishment to broke

Wall Street Reform Legislation May Include Aiding and Abetting Liability Provision

U.S. Senator Arlen Specter (D-Pa.) has introduced an amendment to the larger Wall Street reform legislation currently working its way through Congress that would create a private cause of action against anyone who “knowingly provides substantial assistance” to a primary violator of the federal securities laws. Senator Specter, joined by several other senators, proposed the amendment last week.

Could Wall Street Reform Spell End of Mandatory Pre-Dispute Arbitration Clauses in Securities Disputes?

An important issue confronting Congress in the debate over Wall Street reform is the use of mandatory pre-dispute arbitration provisions in account opening forms between consumers and their broker-dealers and investment advisors.

Specter Bill Awaits Mark-up

On September 17th of last year, the U.S. Senate Committee on the Judiciary's Subcommittee on Crime and drugs held a hearing on the "Liability for Aiding and Abetting Securities Violations Act of 2009". Senator Arlen Specter, a Democrat from Pennsylvania, introduced the S. 1551, which Specter stated was intended to overturn two "errant" decisions of the Supreme Court - Central Bank of Denver v. First Interstate Bank of Denver and Stoneridge Investment Partners. To accomplish this reversal, S. 1551 amends the Securities and Exchange Commission Act of 1934 to authorize a private right of action against those aiding and abetting securities fraud.

Prior to Central Bank, which was decided by the Supreme Court in 1994, private litigants could sue aiders and abettors under Section 10(b) of the 1934 Act. After Central Bank and continuing with Stoneridge in 2008, the Court placed constraints on the ability of a plaintiff in a civil securities lawsuit to maintain an action against secondary actors like auditors, accountants, bankers, and lawyers. Specter's bill would place liability on "any person that knowingly or recklessly provides substantial assistance to another person" in violation of the Act.
 
During the hearing, Tanya Solov of the North American Securities Administrators Association argued in favor of S. 1551, noting that if secondary actors such as accountants and lawyers "are allowed to avoid liability for their actions, there will be no deterrent to prevent them from engaging in fraudulent schemes." Also in favor of the bill was Columbia University law professor John C. Coffee, Jr., but he called for the addition of caps on the amount of any recovery, $2 million in the case of an individual and $50 million in the case of a public corporation.

Robert Giuffra, Jr., a partner at Sullivan & Cromwell LLP and chief counsel of the U.S. Senate Banking Committee during the Clinton administration, opposes S. 1551, arguing that it "would hurt the competitiveness of U.S. capital markets and financial centers and vastly expand the potential liability and defense costs of innocent third parties that do business with public companies." He was concerned that there would be pressure to settle such cases because the ambiguity of the terms stipulating liability would create uncertainty about the applicable legal standard.
The bill awaits mark-up by the Judiciary Committee, a necessary step before the Committee can report it to the full Senate for consideration. It is far from clear whether the legislation will be taken up by the 111th Congress, either on its own or as part of other financial reform bills.