What is the Investor Protection Act?
The Investor Protection Act is one component of the vast Dodd-Frank Wall Street Reform and Consumer Protection Act of 2009designed to extend the powers of the Security and Exchange Commission (SECOND). The law established a reward for whistleblowers for reporting financial fraud, increased liability for complicity, and doubled funding for the SEC over a five-year period.
Also known as the Investor Protection Act 2009, it was introduced as part of regulators’ attempt to prevent some of the problems that caused the financial crisis to reproduce in the future.
Key points to remember
- The Investor Protection Act of 2009 was designed to expand the powers of the Securities and Exchange Commission (SEC).
- Part of the Dodd-Frank Act, it was created to prevent some of the problems that caused the financial crisis from happening again in the future.
- The law established a committee to consult with the SEC on regulatory priorities regarding new financial products, fee structures and trading strategies.
- Whistleblowers have been given increased protections under the law.
Understanding the Investor Protection Act
The Investor Protection Act created the Investor Advisory Committee to consult with the SEC. The committee meets at regular intervals each year and advises on matters such as regulatory priorities and issues surrounding new financial products, fee structures and business strategies. He also advises on initiatives to protect the interests of investors and promote confidence in the of the market integrity by requiring the disclosure of conflicts of interest and risks associated with investment products.
The law also strengthened the guarantees and rights of whistleblowers, which can file a complaint against employers between 90 and 180 days after discovering a violation. This included granting the SEC the power to recommend granting whistleblowers monetary rewards of up to 30% of penalties exceeding $1 million. In addition, the law created the SEC’s Investor Protection Fund, which provides payments to whistleblowers and supports investor education initiatives.
Other whistleblower protections offered by law include prohibiting employers from demoting, suspending, firing, threatening, or otherwise discriminating against employees or agents who provide information to the SEC or participate in investigations. A whistleblower is authorized to take legal action if such problems occur.
Another key element of the law deals with the regulation of credit rating agencies because of the essential role they play in the market. The rise in conflicts of interest and other issues that arose during the mortgage crisis from these agencies have led many banks to mismanage risk, posing a threat to investors. Regulations now require rating agencies to be more indebted and transparent about their practices.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2009 was created by the Obama administration to improve accountability and transparency in the financial system. The move was in response to the subprime mortgage collapse which led to 2008 financial crisis.
Dodd-Frank was created to prevent predatory loan and to help consumers understand the terms of their debt. The law included a consumer financial protection agency that would regulate mortgages, auto loans and credit card. Additional powers were also granted to the SEC, including authorization to gather information, communicate with investors and the public, and launch investor protection programs.
Changes have also been made to previous legislation, including the Securities Investor Protection Act 1970 (SIPA) and the Sarbanes-Oxley Act of 2002. Changes to SIPA include an increase in the minimum assessment paid by Securities Investor Protection Society (SIPC) of a lump sum of $150 per year at 0.02% of the member’s gross income from securities trading. The borrowing limit on US Treasury loans was also increased from $1 billion to $2.5 billion. Amendments to Sarbanes-Oxley added brokers and traders to the Public Company Accounting Oversight Board’s sphere of oversight.
In May 2018, President Donald Trump signed a partial repeal of the Dodd-Frank Act.
In May 2018, President Trump signed a partial repeal of the Dodd-Frank Act after the Senate passed a bill to exempt a number of banks from regulation under the act. Trump claimed the law unfairly prejudices certain institutions, preventing them from lending to different types of businesses, including small businesses.