Waters Wins Big for Shareholders in Wall St Reform and Consumer Protection Bill
The Wall Street Reform and Consumer Protection legislation passed by the House today includes a number of provisions introduced and championed by Congresswoman Maxine Waters (D-CA) to empower shareholders.
"Shareholders deserve greater representation on the boards of companies they have investments in – and more of a voice in how the businesses are run – so proxy access is of great importance," said Congresswoman Waters. "In addition, investors should have an opportunity to pursue restitution from entities that engage in or facilitate fraud. I hope that the GAO study is not a way to delay dealing with this problem, but rather to clearly document it further and to outline decisive action that shareholders can take against aiders and abettors of fraud."
Empowering Shareholders and Preventing Conflict of Interest
Empowering Shareholders by Allowing Proxy Access: Recent corporate scandals – coupled with skyrocketing executive compensation packages – highlight the need for shareholders to have more of a say in how the companies in which they have invested are run and by whom. Currently, shareholders are severely limited in their ability to nominate their own candidates or to submit their own proposals to the Board of Directors. Congresswoman Waters helped draft an amendment that was included in the final financial regulatory reform bill to give the SEC the authority to issue rules on proxy access, which will result in greater shareholder participation in Board nominations and proposals.
Preventing Conflict of Interest: Credit rating agencies are supposed to provide objective, independent assessments of the creditworthiness of financial instruments. However, during the housing boom, the top credit rating agencies – Standard & Poor, Moody's, and Fitch – caved to pressure from bond and securities issuers and provided overinflated, triple-A ratings to $855 billion worth of subprime mortgage-backed securities, while pulling in enormous profits for these ratings. Congresswoman Waters introduced an amendment that was included in the final financial regulatory reform bill to prohibit the compensation of the Board of Directors of credit rating agencies from being linked to the business performance of the firm, ensuring that the Board will act independently of the company's business interests and will provide objective reporting to the SEC.
Empowering Shareholders Who Have Been Victimized by Securities Fraud: Corporations and individuals who carry out large fraudulent schemes often rely on assistance from others; however, a Supreme Court ruling in 2008 in the Stoneridge case effectively allows secondary actors who aid and abet in securities fraud cases to escape liability. Congresswoman Waters introduced an amendment to hold those who cheat investors accountable. It would restore the right of shareholders who have been victimized to pursue restitution from secondary actors who aid and abet in securities fraud cases. The House conferees approved her amendment but the Senate conferees made a counteroffer, which is included in the final regulatory reform bill, to have the Government Accountability Office study the merits of the proposal.
"This legislation has been designed to prevent another financial crisis, to reform how Wall Street and the nation's major financial institutions operate, and to protect American consumers from predatory loans, excessive bank charges and credit card fees. Families and small businesses on Main Street in cities and towns across the country will benefit from our efforts to hold Wall Street accountable," the Congresswoman said.
Congresswoman Waters served on the House-Senate conference committee that crafted the conference report by reconciling differences between House and Senate versions of the legislation. She negotiated with her colleagues in the House and Senate, among both Democrats and Republicans, to include these provisions and others in support of the following priorities:
• Helping Homeowners
• Strengthening Consumer Financial Protection
• Increasing Access and Opportunity for Minorities
The Wall Street Reform and Consumer Protection Act protects savings and investments of American families and small businesses by making the financial system more transparent and accountable, closing loopholes that big banks have exploited, and ending taxpayer-funded bailouts of Wall Street firms who made reckless decisions. To learn more about this legislation, click here.
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