More regulation on tap for Munis?

Federal laws that exempt much of the $2.8 trillion municipal bond market from filing quarterly financial statements and U.S. Securities and Exchange Commission regulation should be repealed, Commissioner Elisse Walter said.

Walter is the third commissioner this year to call for municipal bond issuers to follow the same rules as sellers of corporate securities. SEC Chairman Mary Schapiro has hinted that the commission would seek expanded authority over the market sometime in 2010, and Commissioner Luis Aguilar called for greater oversight. All three have been appointed since 2008.

The Government Finance Officers Association, which represents state and local municipal officials, “strongly opposes any actions by the SEC or Congress” to give the commission “direct authority over municipal bond issuers or to directly or indirectly impose new disclosure or accounting standards,” according to a comment letter filed with the SEC in September.

Committee Approves Private Advisor Registration Bill

Could it be that the long awaited first step toward the anticipated increase in demand for compliance professionals has been taken? Yesterday, the House Financial Services Committee passed H.R. 3818, the Private Fund Investment Advisers Registration Act, introduced by Congressman Paul E. Kanjorski (D-PA), Chairman of the House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises. The Committee passed H.R. 3818 with extensive bipartisan support by a vote of 67-1. Today, the Committee is expected to vote on Chairman Kanjorski’s H.R. 3817, the Investor Protection Act and H.R. 3890, the Accountability and Transparency in Rating Agencies Act.

But the bill fell short of a White House proposal to oversee private pools of capital. The committee exempted venture capital funds and funds with less than $150 million in assets.

Securities and Exchange Commission Chairman Mary Schapiro warned broadly at a Wall Street conference on Tuesday against too many exemptions, saying she would work with Congress to avoid creating new carve-outs that "could come back to haunt investors in later years."

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Bernanke to Congress: Now's the Time

Fed Chairman Ben Bernanke urged Congress on Friday to enact legislation overhauling the nations' financial regulatory system to prevent a repeat of the banking and credit turmoil that created the financial crisis.

“With the financial turmoil abating, now is the time for policymakers to take action to reduce the probability and severity of any future crises,” Mr. Bernanke said in remarks to a Fed conference in Chatham, Mass.

The Fed has recently been moving to strengthen oversight of banks, and intensify consumer protections. On Thursday it announced a sweeping proposal to police banks’ pay policies to make sure they do not encourage top executives and other employees to take outsize risks.

But Congress needs to step in and close regulatory gaps and make other changes that only lawmakers have the power to make, Mr. Bernanke said.

At the top of Mr. Bernanke’s list: Congress must set up a mechanism similar to the FDIC to safely wind down big financial firms whose failure could endanger the entire financial system.

And, the costs for such a mechanism should be paid for through an assessment on the financial industry, not by taxpayers, the Fed chief said.

Moreover, Congress needs to set up better systems for regulators to monitor risks lurking in the financial system, he said.

The Obama administration has proposed such action as part of its revamp of financial rules. Its plan would expand the Fed’s powers over big financial institutions but reduce it over consumers. Congress, however, is leery of expanding the Fed’s reach because it and other regulators failed to crack down on problems that led to the crisis.

A House panel on Thursday approved a piece of the Obama plan, the creation of a federal agency devoted to protecting consumers from predatory lending, abusive overdraft fees and unfair rate increases.

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