Tuesday, March 12, 2013

House Financial Services Committee Sets Forth Its Oversight Agenda for the 113th Congress

The House Financial Services Committee will conduct an intensive monitoring of the regulatory implementation of the Dodd-Frank Act to ensure that regulators carefully and transparently assess the costs and benefits of regulations called for by the Dodd-Frank Act in order to strike an appropriate balance between prudent regulation and economic growth. As part of its oversight agenda for the 113th Congress, the Committee will also examine the extent to which a lack of global coordination on financial reforms could place the United States financial services industry at a competitive disadvantage.        

The Committee will monitor the impact of the  JOBs Act on the capital markets, investor protections, and the SEC’s implementation of the law to ensure that the Commission fulfills Congressional intent and does not unnecessarily stifle the capital formation initiatives. The Committee will examine the state and operation of the U.S. mutual fund industry, including pending regulatory proposals by the SEC and the FSOC to reform money market mutual funds, and private sector initiatives to improve investor understanding of money market fund valuations.
 
The Committee will also review the impact of Title VII of the Dodd-Frank Act on the operations, growth and structure of the OTC derivatives market. The Committee will explore how the SEC and CFTC are implementing the regulations mandated by the Dodd-Frank Act to govern the OTC marketplace, including how U.S. regulators are coordinating their efforts with foreign counterparts, given the global and interconnected nature of that marketplace. The Committee will closely examine how completed rules are functioning in the marketplace and consider potential legislative and regulatory solutions to clarify the law’s intent.

The oversight panel will examine the continuing role that credit rating agencies, also known as Nationally Recognized Statistical Ratings Organizations (NRSROs), play in the U.S. capital markets, the SEC’s oversight of NRSROs and theur compensation models, and whether NRSRO methodologies accurately reflect the risks associated with different debt instruments. The Committee will examine the impact of the Dodd-Frank Act on competition among current NRSROs, and on new and prospective NRSROs. The Committee will examine the implementation by Federal regulators of provisions found in Section 939A of the Dodd-Frank Act requiring them to establish new standards for evaluating credit-worthiness that do not include references to ratings issued by NRSROs. The Committee will also closely examine any SEC initiatives to insert the government into the assignment of ratings.

During the 113th Congress, the Committee will review the SEC’s regulation and oversight of broker-dealers and investment advisers, including the SEC’s consideration of proposals to impose a harmonized standard of care applicable to broker-dealers and investment advisers when providing personalized  investment advice to retail customers. The Committee will also review proposals that would harmonize the frequency of examinations of broker-dealers and investment advisers.  The Committee will also monitor the coordination between the SEC and the Department of Labor regarding rules governing the provision of advice related to retirement accounts.

The Committee will review the growth and impact of algorithmic trading and the impact that market structure has on retail investors, small public companies and the impact of decimalization on market quality and capital formation. The Committee will review developments and issues concerning corporate governance at public companies and the SEC’s proposals that seek to modernize corporate governance practices. The Committee will examine how the Dodd-Frank Act impacts the corporate governance practices of all issuers, particularly small public companies.
 
The Committee will also examine the services provided by proxy advisory firms to shareholders and issuers to determine whether conflicts of interest exist.

The Committee will continue to monitor the effect that the Sarbanes-Oxley Act of 2002 has on the capital markets and capital formation; the impact of the permanent exemption from Section 404(b) for public companies with less than $75 million in market capitalization; and 6 proposals to further modify this exemption.

The Committee will review the operations, initiatives, and activities of the Securities Investor Protection Corporation, as well as the application of the Securities Investor Protection Act (SIPA). In light of SIPC’s  exposure to the failures of Bernard L. Madoff Investment Securities, Lehman Brothers, and  MF Global, the Committee will examine SIPC’s existing reserves, member broker-dealer  assessments, access to private and public lines of credit, and coverage levels, as well as proposals to improve SIPC’s operations and management. The Committee will also review the impact of the provisions of the Dodd-Frank Act that amend the SIPA, and the work and  recommendations of the SIPC Modernization Task Force.’

The Committee will continue to examine the state and operation of 20 the U.S. mutual fund industry, including pending regulatory proposals by the SEC and the 21 FSOC to reform money market mutual funds, and private sector initiatives to improve 22 investor understanding of money market fund valuations.

The Committee will monitor the joint risk retention rule-making mandated by Section 941 of the Dodd-Frank Act to ensure that the development and implementation of the risk retention rules promote sound underwriting practices without constricting the flow of credit and destabilizing an already fragile housing market, and that those rules appropriately differentiate among multiple asset classes. The Committee will focus particular attention on the joint rulemaking to define a class of qualified residential mortgages (QRMs) that will be exempt from risk retention requirements.

As Congress moves towards creating a private market for secondary mortgage-backed securities, the Committee will review the potential for covered bonds to increase mortgage and broader asset class financing, improve underwriting standards, and strengthen United States financial institutions by providing a new funding source with greater transparency, thereby fostering increased liquidity in the capital markets. The Committee will determine if existing regulatory initiatives, including Treasury’s Best Practices for Residential Covered Bonds and the FDIC’s covered bond policy statement to facilitate the prudent and incremental development of the U.S. covered bond market are sufficient to foster the creation of a covered bond market in the United States or whether  legislation will be needed.

 

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