SEC to get more power for investor protection

The bill is one of the initiatives taken by the U.S. Treasury to enable SEC to pass on relevant and timely information to investors, put in place rules that deter people from any wrongdoings pertaining to financial matters, and reward whistleblowers for appropriate and correct information which can be used in enforcement actions.

Power to show the door to abusers of law
The law, when implemented, would bestow powers on the SEC wherein it could forbid bonuses or special incentives to brokers and advisers for inducing clients to buy products that may be spinning money for the sellers, but not for the buyers.

"It provides the SEC with a tool that it needs to ensure that such side payments or sales practices or conflicts of interest do not, in fact, interfere with investor interests," said Michael Barr, the U.S. Treasury's assistant secretary for financial institutions.

The SEC would be well within its rights to show the door to individuals who act in contravention to the rules. Such a removal of individuals may not only be from a specific task such as selling securities, but may entail an exit from functioning within the industry.

Reward to whistleblowers
The bill grants SEC the right to recompense whistleblowers who provide the agency information about those bending the securities rules. As on date, the SEC has the authority to reward individuals who provide tip-offs on insider-trading violations.

Under the new legislation, the SEC would set up a fund using the fines and penalties collected from enforcement actions and would reward whistleblowers from this fund.

"These measures will help reduce the likelihood of investor fraud and facilitate SEC action against bad actors involved in securities laws violations," noted SEC Chairman Mary Schapiro.