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House finance committee approves investor protections bill

[JURIST] The US House of Representatives Financial Services Committee [official website] on Wednesday voted 41-28 [press release; record vote, PDF] for passage of the Investor Protection Act [HR 3817 materials]. Among the regulations included in the bill are an enhancement of powers for the Securities and Exchange Commission (SEC) [official website], additional protections for whistleblowers, and establishment of fiduciary duties for brokers and dealers. Bill sponsor Paul Kanjorski (D-PA) [official website] said:

In order to maintain a sound economy, we must improve investor protection and confidence. The Investor Protection Act aims to achieve these goals while also improving enforcement powers at the US Securities and Exchange Commission and implementing a fiduciary standard for broker-dealers and investment advisers to ensure that customers' interests are at the forefront of investment recommendations. Our financial system has failed far too many investors for far too long and we must change course. I believe this bill has the capabilities to address many of the problems we continue to face.

With its passage by a strict party-line vote, the bill now moves to the full House, though committee chair Barney Frank (D-MA) [official website] indicated on Tuesday that full House voting on this and other financial reform measures is not likely to begin until December [WSJ report].

In the wake of the collapse of the housing and credit markets, as well as the Bernard Madoff scandal [JURIST news archive], financial services reform has been a focus of lawmakers in 2009. In late October, the House Financial Services Committee approved proposed legislation that would establish transparency in credit rating agencies [JURIST report]. That same week, the committee also approved a bill to create a new Consumer Financial Protection Agency, an agency that President Barack Obama called for [JURIST reports] in June. In early September, the SEC inspector general released a report [JURIST report] outlining missteps by the agency in failing to detect the Ponzi scheme that led to Madoff's investors losing an estimated $21 billion.

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