CFA Institute supports U.S. reform bill

The Chartered Financial Analyst Institute (CFA Institute) is voicing staunch support for proposed regulatory reform bill in the U.S.

The proposed Senate Banking Committee bill addresses critical issues such as systemic risks, bank regulatory responsibilities, trading risks, and other considerations for investor priorities.

“Having a properly structured oversight body for systemic risk is critical,” says Kurt Schacht, managing director at CFA Institute, a leading voice on investor issues. “In our view, confidence in the U.S. markets can be greatly improved by having the right combination of expertise and authority for effective detection, mitigation, and resolution of systemic risk problems.”

The new draft proposes the appointment of an independent research office responsible for collecting and analyzing data to inform the Financial Stability Oversight Council’s actions on overseeing systemic risk.

Its contents include “proposals that clarify bank regulatory responsibilities, limit proprietary trading risks, and implement more dynamic and preventative margin and capital requirements during changing market conditions.”

Schacht believes measures suggested in the bill are an indication that investor considerations are finally getting due attention.

“(The legislation) closes the gaps in OTC derivatives regulation and the introduction of a process to reduce the complexity and potential impact of too-big-to-fail institutions shows that the investor perspective has been given strong consideration for the first time in many years.”

Schacht adds say-on-pay and proxy access proposed in the legislation will be critical to ensuring accountability of public companies to their shareowners. This will enable shareholders to effectively exert their ownership rights.

He fears there will be relentless attempts by “banking and other special interests” to eliminate many of these important protections from the final bill.

“The important test for lawmakers will be whether they can ‘hold the line’ for these important investor protections. Congress has a once-in-a-lifetime opportunity to make a positive impact on market fairness and integrity,” says Schacht.

(03/16/10)