Senate Banking Committee Reports Out Financial Reform Bill with Kohl Financial Planner and Senior Investor Protection Amendments

The Senate Banking Committee has reported out financial reform legislation on a partisan 13-10 vote. One of the few if only amendment to the revised draft recently set out by Committee Chair Chris Dodd was offered by Senator Herb Kohl. The Kohl Amendment would mandate a GAO study of the regulatory regime for financial planners as part of the Restoring American Financial Stability Act.

Under Kohl’s provision, the GAO will examine current oversight of the financial planning industry at the state and federal level. It will consider whether financial planning services are being provided by individuals who are licensed for other professions, including insurance and investment advice, and to what degree consumers are aware of the different services being provided. Additionally, the study will look at professional standards currently governing financial planners and financial advisors. The GAO has also been asked to identify both regulatory and legislative fixes to any gaps in regulation that would strengthen oversight of financial planners. The study will report to the Special Committee on Aging, as well as the Senate Banking Committee.

Senator Kohl was also successful in including a provision protecting seniors from fraud at the hands of unscrupulous financial advisors. The provision is based on S. 1661, the Senior Investor Protection Act, which calls for the creation of a new grant program to assist states in their efforts to protect seniors from misleading financial advisor designations. The House included similar provisions in H.R. 4173, the Wall Street Reform and Consumer Protection Act, which passed the House on December 11. 2009.

Title V, Subtitle C, Part 7 of HR 4173 would create a new grant program to provide states with the tools they need to prosecute securities fraud against seniors. The legislation recognizes the harm to seniors posed by the use of misleading professional designations by salespersons and advisers and establishes a mechanism for providing grants to states designed to give them the flexibility to use funds for a wide variety of senior investor protection efforts, such as hiring additional staff to investigate and prosecute cases; funding new technology, equipment and training for regulators, prosecutors, and law enforcement; and providing educational materials to increase awareness and understanding of designations.