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November 05, 2009
House Committee Approves Investor Protection Act
by Robert Kropp
The Act, which includes an amendment authorizing the SEC to allow shareowner votes on corporate
directors, awaits final approval from the full House of Representatives.
SocialFunds.com --
On November 4, the US House Financial Services Committee passed the Investor Protection Act (HR
3817) by a vote of 41-28. Introduced on October 15 by Rep. Paul E. Kanjorski of Pennsylvania, the
Act will double the authorized funding for the Securities and Exchange Committee (SEC) over five
years, and provide the Commission with new enforcement powers and regulatory authorities.
Preceding the Committee's approval of the Act, an
amendment introduced by Representatives Maxine Waters of California and Gary Peters of Michigan,
which confirms the authority of the SEC to issue rules on the right of shareowners to vote on
directors of corporate boards, was approved.
According to Maureen Thompson, Executive
Director of ShareOwners.org, a nonprofit
advocate for retail investors, "Proxy access is actually a market-based approach to regulatory
reform. By giving shareowners a true voice in the boardroom, you can ensure that we will be better
able to provide oversight of directors and management and to hold them accountable for their
actions."
In addition to confirmation of proxy access by investors, the Act will
strengthen the SEC's ability to regulate securities markets, enforce the fiduciary duty of
broker-dealers and investment advisers to prioritize the interests of their customers, and end the
inclusion in contracts of mandatory arbitration in cases of defrauded investors seeking redress.
In a speech delivered to the Practicing Law
Institute on November 4, SEC Chairman Mary Schapiro outlined the ways in which the Commission
proposes to improve proxy access.
Describing the proxy statement as the "only
communication a company makes that is specifically addressed to, and intended for, shareholders,"
Schapiro said, "I believe that the most effective means of promoting accountability in corporations
is to make the shareholders' vote both meaningful and freely exercised."
"Under our
proposal, shareholders who satisfy certain eligibility and procedural requirements would be able to
have a limited number of nominees included in the company's proxy materials," Schapiro said. "The
proposed new rules would also allow shareholders of a company to submit their own proposals to
create an alternative proxy access process for disclosing shareholder nominated candidates,
provided this different process doesn't conflict with Commission rules."
The House
committee's passage of the Investor Protection Act arrives at a time when shareowners are preparing
their resolutions for the 2010 proxy season. According to Thompson of ShareOwners.org, the Act
"will be packaged with other pieces of legislation reforming oversight of the financial markets and
considered on the House floor, most likely in December."
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