Changes
House committee approves new investment rating regulations
The US House Financial Services Committee voted 49-14 Wednesday to approve new regulations governing investment rating agencies. The Investor Protection Act, sponsored by Paul Kanjorski (D-PA), modifies the Securities Exchange Act of 1934, giving the Securities and Exchange Commission (SEC) the authority to monitor and punish ratings agencies. Kanjorski sees the need for increased regulation, saying:
The financial crisis exposed the perils of deregulation. The Investor Protection Act will right these wrongs by reforming the Securities and Exchange Commission (SEC) to strengthen its powers, better protect investors, and efficiently and effectively regulate our securities markets.
With the bill out of committee, a vote on the floor of the House could be scheduled as early as next month.
Since the subprime mortgage crisis, lawmakers have discussed extensive reforms to US financial regulations. Although some reforms have already been enacted, President Barack Obama called for even stronger regulations for certain aspects of the financial industry when he gave a speech marking the one-year anniversary of the collapse of Lehman Brothers Holdings. Lawmakers have charged investment rating agencies for misleading investors by promoting high-risk securities secured by subprime mortgages. In September, 2008, the SEC charged two former brokers with fraud for misrepresenting subprime-backed securities.
(Published by Jurist - October 28, 2009)