February 23, 2010
The Honorable Christopher J. Dodd
Chairman
Senate Committee on Banking, Housing,
and Urban Affairs
534 Dirksen Office Building
Washington, DC 20510
The Honorable Richard Shelby
Ranking Member
Senate Committee on Banking, Housing, and Urban Affairs
534 Dirksen Office Building
Washington, DC 20510
Re: Support for Financial Services Reform Legislation
Dear Chairman Dodd and Ranking Member Shelby:
The Regional Bond Dealers Association (RBDA) strongly supports passage of comprehensive legislation to reform laws and regulations governing our nation’s financial services industry, including efforts to end the taxpayer bailout of financial institutions viewed as “too big to fail”. The financial system cannot operate efficiently if financial institutions and investors assume that the government will protect certain firms from the consequence of poor management. Enacting legislation that establishes clear oversight and transparency in the regulatory system—coupled with strict monetary penalties–will protect investors, strengthen the financial system, and deter financial institutions from pursuing the types of activities that create systemic risk.
In particular, RBDA advocates inclusion of two key provisions in the Senate’s legislation.
First, RBDA supports provisions included in the Chairman’s Mark to register and regulate all brokers, dealers, and municipal finance advisors. Professionals who perform similar functions should be similarly regulated. Currently, many municipal finance advisors have escaped supervision, and this lack of supervision denies regulators and investors access to the information they need to assess the strength of individuals, firms, and market segments. Registration and meaningful regulation of all investment advisors, without imposing undue financial burden, should be a key component in comprehensive reform legislation.
Second, RBDA supports the inclusion of provisions in Senate legislation to create a uniform ratings system for municipal and corporate securities. Under current law, credit rating agencies are allowed to use separate ratings systems to assess the credit-worthiness of municipal and corporate securities. This often leads agencies to assign lower credit ratings to municipal securities, despite their minimal risk of default. Mandating a uniform system will lead to greater disclosure of the credit-worthiness of both municipal and corporate securities and assist investors in determining which type of securities best suits their investment goals. HR 4173, the Wall Street Reform and Consumer Protection Act of 2009, contains provisions to mandate a uniform ratings system and RBDA encourages the Senate to adopt these provisions into its version of financial services reform legislation.
RBDA remains committed to assisting the Committee and the Senate as it works toward passage of this important legislative goal. If you have questions or need further information regarding the impact this and other legislation has on the municipal securities market, please do not hesitate to contact me at 202.509.9669 or mnnicholas@regionalbonddealers.com.
Sincerely,
Mike Nicholas
Chief Executive Officer
cc: All Committee Members
