Whitman news since 1896

Whitman Wire

Vol. CLIV, Issue 10
Whitman news since 1896

Whitman Wire

Whitman news since 1896

Whitman Wire

‘Investor Protection Act’ improves protection

In the course of recent events, Rep. Paul Kanjorski (D-Penn) introduced to the Senate last week the Investor Protection Act that takes measures to protect private investors.

Scandals such as Madoff or Stanford should not happen again, according to the act, as the power of the SEC will be increased.

The financial regulatory system of the U.S. needs new regulatory tools to protect the common investor. The current system is one that corporations control and one to which citizens have fallen prey. But the government needs to be careful, as it should not interfere too much with the financial system, creating a socialist republic.

The new bill in essence allows SEC to request specific documents, conduct random and periodical  surveillance and risk  assessments  of those documents and people of interest when deemed necessary. It will also provide greater incentive and more protection for  whistle blowing  on scandals.

According to Davis Polk, the SEC will act in the best interest of retail and clients, through prohibition of  “sales practices, conflicts of interests and compensation schemes” deemed contrary to investor interests and limiting provisional impartial customer agreements.

Kanjorski simply states that he is “overhauling the regulatory structure of the financial services industry.” But is this necessarily for the better of the individual or is this government meddling with private lives again? Either way, it will be different than the structure we have operating now.

This seems to be a valiant attempt by the government to help the individual stock holder that suffers at the plight of large investors or corporations. However, there is some chance that it just might work.

The SEC lacks power to effectively regulate the stock market because of the most recent issues of the Madoff scandal. According to  USA Today, the SEC was accused of not investigating sooner when the firm was notified as early as 1999 and did not act until December 2008.

Madoff did not suffer; the individual investors who trusted him to provide returns are the ones who lost their life savings.

Too often, private investors are caught in the hands of large corporations, and thus the government needs to interfere, regulating markets to protect the individual. When this is accomplished, faith in government will be restored to citizens. In this case, investors would recognize that the government will watch out for them.

This much-needed change will provide the government with new tools to regulate the market and protect the small investors who are lost amongst the large volume traders, thus providing more checks and balances between government and the autonomous economy.

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