WASHINGTON – According to news reports, federal authorities have begun investigations into whether numerous major banks misled investors about and bet against mortgage derivatives that they helped create.
U.S. Senators Daniel Akaka (D-Hawaii) and Robert Menendez (D-New Jersey) said today that this news, on the heels of similar charges filed against Goldman Sachs, underscores the need for the “Honest Broker” provision to be a part of Wall Street reform. The provision exists in the version of the legislation passed by the House of Representatives, and Akaka and Menendez, as the Senate sponsors, intend to help ensure that it remains as part of the final bill that passes Congress.
Honest Broker would require brokers to act in the best interests of their retail clients and fully disclose any conflicts of interest. It would also give the SEC the power to require brokers to act in the best interests of their institutional investors, which would address cases such as those currently being investigated at the major Wall Street banks.
Senator Akaka said: “The choice is simple: we can either protect investors, or we can allow them to continue to be exploited by brokers that do not act in their best interests. No additional study is needed, we know this is happening. Our amendment brings about an important change to better protect investors.”
Senator Menendez said: “As consumers follow these investigations to see if there is guilt, we should at the very least give them peace of mind that their brokers are managing their hard-earned money honestly. The saying goes, ‘The customer is always right,’ not ‘The customer is an afterthought,’ and that why we think keeping this provision in the final bill is so important.”