Spitzer Assails Measure in House

A House subcommittee passed a measure Thursday that New York Atty. Gen. Eliot Spitzer said would limit his ability to crack down on Wall Street wrongdoing.

The bill by the House Financial Services subcommittee on capital markets could limit the ability of state officials to force brokerages to implement certain reforms as part of legal settlements.

Some legislators have complained that Spitzer usurped the authority of the Securities and Exchange Commission last year when he spearheaded a crackdown on stock analysts. They say piecemeal reforms by various states could undermine the financial markets by creating a cobweb of confusing and contradictory laws.

“States are charged with protecting consumers and investors under state laws, and they’re still free to pursue that under the bill that’s being considered,” a subcommittee spokeswoman said. “All it says is that states can’t set national market policy, and there are good reasons for it.”

Spitzer said the measure would hurt investors by preventing state regulators from forcing major reforms at brokerages.

“This action shreds one of the most basic protections that investors have against fraudulent activities and is an attack on the 75% of Americans who own stock,” he said in a statement.

Spitzer is widely credited with being the driving force behind the stock-analyst crackdown, which in April resulted in a $1.4-billion legal settlement and reform package that 10 major firms agreed to with state and federal regulators.

Critics say the SEC was slow last year to respond to growing evidence of analyst misconduct, and that major reforms wouldn’t have occurred without Spitzer’s involvement.

Spitzer and Rep. Richard H. Baker (R-La.), who chairs the subcommittee, clashed last year after Spitzer signed a $100-million settlement with Merrill Lynch & Co. over analyst behavior. Baker called Spitzer “a failed investor who didn’t understand the markets” and was “making up his own rules about how to protect all other investors.”

The bill now will be considered by the full committee.

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Bloomberg News was used in compiling this report.