THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Friday, August 4, 1995 TAG: 9508030008
SECTION: FRONT PAGE: A12 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 56 lines
Republicans in Congress are proposing to fight crime by disarming citizens and taking the cop off the beat. It's not street crime they want to go soft on, of course. It's Wall Street crime.
Under a bill passed by wide margins in both House and Senate, lies by sellers of securities would no longer be treated as fraud. Knowledge of chicanery by accountants, investment bankers and other enablers would escape prosecution.
The statute of limitations would be reduced to three years, though uncovering financial scams often takes time. And loser-pays provisions would deter small investors from bringing suit against institutions with deep pockets.
In effect, investors will be disarmed by this legislation and financial finaglers will be granted a license to steal. There's no question customers need to heed the adage, let the buyer beware. But when some of the biggest names on Wall Street are caught in flimflam, citizens need some recourse.
There's no question government regulations can become too onerous and need periodic pruning, but this bill would slash and burn the protections that small investors need. The House and Senate versions are headed for conference, and if they aren't toned down face a presidential veto. Wall Street favors the bill, but the list of opponents includes the Congressional Budget Office, the Securities and Exchange Commission, AARP and a host of other interest groups representing small investors and pension funds.
At the same time this legislation would restrict the ability of citizens to take their case to court, another bill introduced last week by Rep. Jack Fields, R-Texas, would weaken protections provided by the SEC, the watchdog agency that's supposed to keep Wall street honest.
Some of Fields' provisions are sensible reforms: reducing fees corporations pay to register securities, replacing a hodgepodge of state regulations with a single national standard.
But other provisions are questionable. Corporations would have to tell shareholders less about takeover activity. Investors in new stock issues would no longer have to receive a prospectus before buying. Brokers would no longer be liable for unsuitable sales to large institutions, like Orange County. The number of SEC commissioners would be cut from 5 to 3 and they'd have the power to grant exemptions to rules.
Such changes would permit financial firms greater latitude, subject them to less scrutiny and provide investors with less information. At a time when more small investors are putting money into markets for their children's education and their own retirement, they need all the protection they can get. Congress needs to worry less about the happiness of Wall Street campaign contributors and more about the safety of Main Street investors. by CNB