House Backs Securities Reform

The House on Tuesday approved a bipartisan bill that would modernize federal securities laws, end most state regulation of mutual funds and stock issues and give the Securities and Exchange Commission power to drop obsolete rules and grant exemptions.

Despite objections from state regulators that investors would lose the protections of state laws, the measure was endorsed by Democratic and Republican leaders and passed by the House on a voice vote.

The Senate Banking Committee is scheduled to vote later this month on similar but more limited securities law changes. Because of strong support for the House bill, many of its provisions are likely to be added to the Senate measure, congressional leaders predicted.

“I still think that we have a good chance of seeing what we voted on today enacted into law within the next couple of months,” said Rep. Edward J. Markey (D-Mass.), the top Democrat on the House panel that drafted the legislation.

The author of the bill, Rep. Jack Fields (R-Texas), said it updates many technical securities law provisions that were written in the 1930s and ‘40s.

Fields had originally set out to draft a broader and more controversial revision of securities laws that he said was intended to create a uniform, nationwide regulatory system. But his proposals to loosen rules governing corporate takeover fights, reduce the SEC from five commissioners to three and nearly eliminate state securities regulation ran into heavy opposition.

Fields and Markey negotiated a compromise in March that called for study of the most contentious provisions in the bill and allowed the remainder of the measure to move through the House with the support of both parties.

The only significant opposition came from the North American Assn. of Securities Administrators, the organization of state regulators, which contends the Fields-Markey bill still goes too far in curtailing the power of state regulators.

Under the version passed Tuesday, states would no longer have the power to review, and possibly block, mutual fund and securities offerings. The SEC would take over registration of mutual funds and the states would review only stock offerings by smaller companies.

State regulators would keep their power to enforce state and federal securities fraud laws, to oversee brokers and to collect fees for registering securities offerings in their states.

Much of the bill deals with mutual funds and is designed, Fields said, to catch up with the growth and evolution of such funds.