03/18/2010 05:12 am ET Updated May 25, 2011

Lobbyists To Fight Investor Protection Regulation

The financial sector ranks just behind the health industry in lobbying Congress this year: $223 million has been spent to influence financial reform efforts, according to the Center for Responsive Politics.

But Politico reports that the lobbying frenzy over "re-regulation" efforts is just beginning.

The House Financial Services Committee will hold a hearing Tuesday on several sections of the reform effort -- hedge fund registrations, the creation of an agency to oversee the insurance industry and a law to protect consumer investors. The need to upgrade investor protections will become a central issue in reform efforts.

Among the proposals in a draft of the Investor Protection Act released from (Rep.) Kanjorski's House Capital Markets, Insurance and Government Sponsored Enterprises Subcommittee last week is creation of a "harmonized" fiduciary standard that would ensure "broker-dealers and investment advisers will have to put customers' interests first."

To Bill Baldwin, chairman of the board of directors of The National Association of Personal Financial Advisors, the draft was "an announcement that we do have a problem." As he interprets it, "harmonizing is code for watering ... down" the current standard.

Dow Jones Newswire reports that representatives from the private-equity and hedge fund industries will testify before the House Financial Services Committee on proposals to boost investor protections.

Highlighting the difficulty for policy makers attempting to shepherd an ambitious financial regulatory system overhaul through Congress this year, the message from industry participants shows few areas of solid agreement.

"Requiring open-ended disclosures to these third parties, as the draft contemplates, is highly problematic," Douglas Lowenstein, president and chief executive of the Private Equity Council, said in his prepared remarks.