Corporate & Securities Law

By Jim Hamilton

Two new provisions were put into the financial reform conference bill this past week. They were both proposed by the House and accepted by the Senate.

SEC Ombudsman: There would be created within the SEC an overall ombudsman. This was proposed by Rep. Scott Garrett, who explained that the ombudsman would ensure that SEC-regulated persons can ask questions without fear of an enforcement action. (House-Senate conference committee meeting, June 16, 2010). Chairman Frank supported it, but said that this provision would have to be harmonized with the Senate provision creating an office of Investor Advocate in the SEC. Indeed, the Senate accepted the proposal, contingent on placing the SEC Ombudsman within the new Office of Investor Advocate. While the legislative language will very likely incorporate much of H 7420, the fact that the Ombudsman will be placed within and harmonized with the Office of Investor Advocate created by Sec 914 of the Senate bill (and base conference bill), as per the Senate?s condition on agreeing with the proposal, the final legislative language will probably be different from H 7420.

Office of Whistleblower Protection: The Senate agreed to an amendment proposed by Rep. Ed Royce and Rep. Spencer Bachus, Ranking Member on the Financial Services Committee, that would create an office at the SEC to handle whistleblower provisions in the base conference bill. The Royce-Bachus amendment will improve the stature of whistleblower complaints within the SEC by establishing a separate office within the Commission to better protect whistleblowers and ensure their concerns are being acted upon by the SEC. According to Rep. Bachus, this amendment will ensure that the SEC will have a high ranking official and office to coordinate and pursue the huge volume of whistleblower tips that very well could prevent future frauds like Madoff and Allen Stanford. Complaints from within industry or by investors are the cheapest, most effective way to identify fraudsters, Rep. Bachus said. (House-Senate conference committee meeting, June 16, 2010).

Full post as published by Jim Hamilton's World of Securities Regulation on June 19, 2010 (boomark / email).