FACTBOX: Major U.S. financial regulation reform proposals

The U.S. House of Representatives Financial Services Committee on Wednesday approved legislation to toughen regulation of credit rating agencies.

The approval marked another incremental advance in the drive by the Obama administration and congressional Democrats to tighten bank and capital market regulation.

Below is a summary of proposals. Companies whose businesses could be at risk are listed under "political risk exposure."

CREDIT RATING AGENCIES:

* Bill approved by House Financial Services Committee on October 28 sets up SEC oversight office, exposes agencies to more investor lawsuits, reduces references in U.S. law to ratings. (For House bill, double-click on http://www.house.gov/apps/list/speech/financialsvcs_dem/markup_102109.shtml)

* Bill filed in Senate by Democratic Senator Jack Reed. No action yet. (For Reed bill, double-click on http://www.thomas.gov/cgi-bin/bdquery/D?d111:8:./temp/~bdlq89::|/bss/|)

* Obama administration bill similar to House bill, but excludes lawsuit exposure provision. (For administration bill, double-click on http://www.financialstability.gov/docs/regulatoryreform/titleIX_subtC.pdf)

Political risk exposure: Moody's Corp, Standard & Poor's, Fitch Ratings.

SYSTEMIC RISK/RESOLUTION/BANK SUPERVISION:

* Obama administration and House Financial Services Committee on October 27 unveiled new draft legislation to set up systemic risk council, empower regulators to manage and shut down large financial firms that threaten economic stability and require industry to foot the bill for FDIC resolutions. Bill would close U.S. Office of Thrift Supervision, take over steps to streamline bank supervision. (For new bill, double-click on http://www.house.gov/apps/list/press/financialsvcs_dem/presstitleone_102709.shtml

* Senate Banking Committee Chairman Christopher Dodd favors more dramatic centralization of bank supervision.

OTC DERIVATIVES:

* House Financial Services Committee on October 16 approved bill to regulate OTC derivatives, encouraging wider use of exchanges and central clearinghouses, with numerous exemptions. (For committee bill, double-click on http://www.house.gov/apps/list/speech/financialsvcs_dem/markup_100809.shtml)

* House Agriculture Committee on October 21 approved broadly similar OTC derivatives bill with fewer exemptions. (For committee bill, double-click on http://agriculture.house.gov/inside/legislation.html)

* Two House committee chairmen working on compromise bill to bring to House floor within weeks.

* Both House bills exempt more derivatives from regulation than earlier Obama administration draft legislation. (For administration bill, double-click on http://www.financialstability.gov/docs/regulatoryreform/titleVII.pdf)

* Bill introduced by Senator Reed. No action taken. (For Reed bill, double-click on http://www.thomas.gov/cgi-bin/bdquery/D?d111:19:./temp/~bdpPPm::|/bss/|)

* Bill introduced by Senator Tom Harkin to end commodity-related OTC trading. No action taken. (For Harkin bill, double-click on http://thomas.loc.gov/cgi-bin/bdquery/D?d111:10:./temp/~bdx0NP::|/bss/|)

Political risk exposure: JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, CME Group Inc, IntercontinentalExchange.

EXECUTIVE PAY:

* Full House approved bill on July 31 to give shareholders annual, nonbinding votes on executive pay, and ban pay at major financial institutions that encourages excessive risk-taking. (For House bill, double-click on http://www.house.gov/apps/list/press/financialsvcs_dem/hr3269.pdf)

* Obama administration bill would give shareholders more "say on pay," like House measure, but not empower regulators to ban risk-inducing pay structures. (For administration bill, double-click on http://www.treas.gov/press/releases/docs/tg_218IX.pdf

* No action taken in Senate.

CONSUMER PROTECTION:

* House Financial Services Committee on October 22 approved bill to create Consumer Financial Protection Agency (CFPA) to oversee mortgages, credit cards, other financial products.

* House bill pares back original administration proposal by exempting many businesses, either in full or in part, including auto dealers; credit, mortgage and title insurers; banks with less than $10 billion in assets; credit unions with less than $1.5 billion in assets.

* House bill also softened Obama proposal to give states wide latitude to write and enforce laws stricter than CFPA's.

(For administration bill, double-click on: http://www.financialstability.gov/docs/CFPA-Act.pdf)

STUDENT LOANS:

* Full House on September 17 approved bill, supported by the Obama administration, to revamp student loan industry. (For House bill, double-click on: http://edlabor.house.gov/documents/111/pdf/legislation/StudentAidandFiscalResponsibilityAct.pdf)

* No Senate action.

Political risk exposure: Sallie Mae (SLM Corp), Student Loan Corp, JPMorgan, Bank of America, ITT Educational Services, Corinthian Colleges.

CAPITAL AND LIQUIDITY STANDARDS:

* Obama administration, like many governments worldwide, wants financial firms to hold more capital to absorb losses when times are tough.

* Capital standard oversight central to systemic risk/resolution authority bill proposed by administration.

* Similar proposals in September 25 G20 summit accord.

(For administration bill, double-click on: http://www.financialstability.gov/docs/regulatoryreform/07222009/titleVI.pdf)

(For the G20 final communique, double-click on: http://www.g20.org/Documents/pittsburgh_summit_leaders_statement_250909.pdf)

SECURITIZATION:

* Administration proposal calls for issuers of asset-backed securities to face new reporting requirements and keep at least 5 percent of performance risk in loans they securitize.

* Transactions would be more standardized, compensation of securitizers would be linked to long-term performance.

Political risk exposure: Citigroup, Wells Fargo, Bank of America, JPMorgan Chase.

(For administration bill, double-click on http://www.financialstability.gov/docs/regulatoryreform/07222009/titleIX.pdf

INVESTOR PROTECTION:

* House Financial Services Committee on October 28 debated ordering SEC to set common standards for brokers and investment advisers, ending differences between the two.

* Committee bill would let SEC restrict mandatory arbitration between investors and brokers and set up a fund to pay corporate whistleblowers for information.

* It would double SEC's budget over five years to $2.25 billion by fiscal 2015, and beef up enforcement powers of SEC and Public Company Accounting Oversight Board.

(For committee bill, double-click on http://www.house.gov/apps/list/speech/financialsvcs_dem/discussion_draft_of_the_investor_protection_act_of_2009.pdf)

* Administration has made similar, less far-reaching proposals. (For administration bill, double-click on http://www.treas.gov/press/releases/docs/tg205071009.pdf)

HEDGE FUNDS, PRIVATE EQUITY, OFFSHORE:

* House Financial Services Committee on October 27 approved bill requiring hedge funds, private equity firms, offshore funds to register with SEC. Venture capital firms exempted.

* Committee bill required periodic inflation adjustments of net worth thresholds for eligibility to invest in hedge funds. (For committee bill, double click on http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Discussion_Drafts/Discussion_Draft_of_the_private_fund_investment_advisors_registration_act_10_06_09.pdf)

* Related bill filed by Senator Reed. No Senate action taken. (For Reed bill, double-click on http://www.thomas.gov/cgi-bin/bdquery/D?d111:11:./temp/~bdAEZy::|/bss/|)

Political risk exposure: Bridgewater Associates, D.E. Shaw Group, Farallon Capital Management, Citadel Investment Group, Fortress Investment Group and many others.

INSURERS:

* House Financial Services Committee on October 27 delayed action on bill to set up a new Treasury Department Office of National Insurance to monitor insurance industry and gather data, but not regulate.

Political risk exposure: Allstate Corp, Travelers Cos Inc, Hartford Financial, MetLife Inc, Prudential Financial Inc.

(For House bill, double-click on http://financialservices.house.gov/Key_Issues/Financial_Regulatory_Reform/FinancialRegulatoryReform/Discussion_Drafts/Amdt_in_nature_of_substitute_to_HR_2609_10_16_09.pdf)

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