108th Congress: 1st Session Wrap
- o Senate action has been scheduled on H.R. 975, the House-passed bankruptcy reform bill, as other financial
services industry initiatives and bills from the Senate Judiciary Committee have enjoyed a higher priority (e.g.,
Fair Credit Reporting extension; asbestos litigation reform).
- The "Customs Business Fairness Act" (S. 1772) was introduced by Sen. Graham (R-S.C.) and Sen. Durbin
(D-Ill.) on Oct. 21. The bill would amend §507(a) to create a new tenth priority for the payment of claims for
duties paid to the United States by licensed customs brokers on behalf of the debtor. The bill was referred to the
Senate Judiciary Committee. (The House companion bill is H.R. 3003).
- The House report on the "Financial Contracts Bankruptcy Reform Act" (H.R. 2120) was filed on Sept. 18 (H.
Rpt. 108-277). The bill would revise the bankruptcy laws and other federal statutes with respect to the
termination and netting of financial contracts, once a party to the agreement files for bankruptcy. The
amendments are designed to clarify and improve the consistency between the applicable statutes and to
minimize the risk of a disruption within or between financial markets upon the insolvency of a market
participant. It has been more than 10 years since the last bankruptcy amendments in this area, and the evolution
of the financial markets since then leaves some of these transactions uncertain in a bankruptcy. The bill, a
product of the President's Working Group on Financial Markets, thus modernizes the treatment of contractual
self-help remedies, such as offset, in the event of a bankruptcy. A referral to the House Judiciary Committee
expired on Nov. 7, clearing the way for the bill to reach the House floor.
- Legislation to reform the mutual fund industry was introduced on Nov. 5 in the Senate amid a flurry of
regulatory charges against the $7 trillion dollar industry. Sponsored by Sens. Akaka (D-Hawaii), Fitzgerald
(R-Ill.) and Lieberman (D-Conn.), the legislation aims to tighten fund governance and shed light on the
financial dealings of fund managers and brokers that sell funds. Congress is calling for major reforms in light of
criminal and civil charges brought against executives of big-fund companies for illegal trading. Known as the
"Mutual Fund Transparency Act," the bill would force 75 percent of fund directors to be independent, including
the chairmen. Directors would face a shareholder vote every five years. It would prohibit boards from making
decisions without the consent of independent directors and requires these directors to nominate board members.
Brokerage commissions would be counted as expenses to induce funds to lower soft costs and thus help
investors better compare expense ratios. Investors would receive a written notice of the amount of compensation
brokers receive for selling fund shares.