WASHINGTON — House lawmakers crafting legislation to overhaul the system of financial regulation are focusing on the key elements of investor protection and bringing investment funds under government supervision as they hear the views of regulators, industry officials and investor advocates.
The House Financial Services Committee was scheduled to begin a hearing Tuesday at 10 a.m. EDT as part of its work on rewriting the U.S. financial rule book.
The Obama administration has proposed legislation to protect investors by bolstering the authority of the Securities and Exchange Commission, putting stockbrokers and investment advisers providing services to retail investors under the same standards of conduct, and strengthening rules governing the timing and quality of disclosures by investment funds.
The administration also has proposed putting private pools of capital – hedge funds, private equity and venture capital funds – under government supervision by requiring they register with the SEC. That would open their books to federal inspection and they would be subject to disclosure requirements to investors and creditors. During the financial crisis, private funds had to come up with money when their capital was put at risk, contributing to the strains on the financial markets, the administration maintains.
Scheduled witnesses at Tuesday's hearing include Denise Voigt Crawford, president of the North American Association Securities Administrators Association, which represents state securities regulators, and Richard Ketchum, CEO of the Financial Industry Regulatory Authority, the brokerage industry's self-policing organization.
Also expected to testify are investor advocate Mercer Bullard, the president of Fund Democracy Inc.; Richard Baker, president of the Managed Funds Association, the hedge fund industry's trade group; Douglas Lowenstein, president of the Private Equity Council; Terry McGuire, chairman of the National Venture Capital Association; and James Chanos, a prominent short seller who heads the Coalition of Private Investment Companies.
The hearing also is examining the proposed creation of a national insurance office, which would collect data on the industry and advise the new systemic risk regulator – possibly the Federal Reserve – on possible threats.
Big insurance companies have been lobbying for Congress to free them from a web of state rules by establishing a federal regulator and letting the companies choose which rules to follow.
Witnesses slated to appear include Therese Vaughan, CEO of the National Association of Insurance Commissioners, the state regulators' association; Dennis Herchel, assistant vice president of Massachusetts Mutual Life Insurance Co., on behalf of the American Council of Life Insurers; and J. Stephen Zielezienski, senior vice president and general counsel of the American Insurance Association.