On November 10, 2009, Senator Christopher Dodd (D-CT) introduced the “Restoring American Financial Stability Act of 2009” which addresses many of the issues raised by the Obama administration’s reform proposals that were released on June 17, 2009 as well as the various proposals and bills introduced in Congress over the past year, including the restructuring bill currently pending before the House Financial Services Committee entitled the “House Financial Stability Bill” authored by Congressman Kanjorski. These Bills focus on several areas, including: (i) creation of a single bank regulator; (ii) creation of a systemic risk regulator and enhancement of oversight and resolution authority for large and complex financial institutions; (iii) registration of advisers to certain private funds; (iv) creation of a consumer financial protection agency and other enhancements to investor protection; (v) changes in the regulation of the insurance, securitization and derivatives markets; (vi) changes to executive compensation and corporate governance for public companies;(vii) enhancing SEC enforcement powers and comprehensive securities review and reorganization. Also included are ending mandatory arbitration and whistleblower bounties.
http://dodd.senate.gov/?q=node/5321
http://kanjorski.house.gov/index.php?option=com_content&task=view&id=1627&Itemid=1

Understanding these complex initiatives is difficult and premature until some reconciliation of the two bills occurs which we cannot envision until 2010. House Democrats are not planning to vote on wide-ranging financial overhaul legislation until the second week of December at the earliest, Rep. Barney Frank (D-Mass.) said on November17th .We suggest that the following will and will not survive;

• Some but not all derivatives will be forced to exchange trading providing more transparency
• Hedge funds will register especially those managing more than $100 million dollars.
• The states will regulate IA’s and Hedge Funds with less than 100 million dollars.
• There will be no single bank regulator or systemic risk regulator other than a task force or working group.
• There will be no consumer protection agency or significant changes to executive compensation or federal insurance regulator.
• The SEC will get most of the billion dollars additional funding proposed.

The administration will be severely criticized for weak reform efforts but it will not impact them if unemployment begins dropping and a health care bill is passed. One other area that may see some results is the debate as to whether brokers should have a fiduciary duty. We see an eventual melding of this regulation where suitability and fiduciary duty become very similar but not identical and where small customers rely on advisers and Internet trading with the big Wall Street firms relying on institutional and very wealthy customers. We do not believe these reforms will be visible to smaller clients but they should reduce the leverage of the larger institutions. Please contact us if you need further information on these issues. Please see the following link for a discussion of financial reform in general by a group of distinguished regulators and business leaders.

http://abovethelaw.com/2009/11/regulation_of_financial_institutions.php