Congressional efforts to chart the future of U.S. financial services regulation continue to forge ahead with the passage by the House of Representatives of a mammoth regulatory reform bill that combines several previous proposals into a massive 1,279 page tome.

The House on Dec. 11 voted 223-202 to approve the Wall Street Reform and Consumer Protection Act, H.R. 4173, a wide-ranging bill to revamp the financial services regulatory landscape in response to the economic crisis. The legislation covers dozens of issues, ranging from consumer protection and federal authority to dismantle financial firms that become "too big to fail" to derivatives oversight. The Act includes several reforms that will impact corporate governance practices at public companies and some that will boost the SEC's regulatory authority.

If approved, the legislation would mark the biggest revamp of U.S. financial rules since the 1930s. However, it's far from a done deal. The Senate is still working on its own reform bill, and even when that's complete, the two chambers would still have to reconcile any remaining differences between the two, which means final legislation may be months away and could look vastly different.

The House legislation encompasses provisions from various reform bills considered by House lawmakers in recent months, including the Financial Stability Improvement Act, Investor Protection Act, the Corporate & Financial Institutions Compensation Fairness Act, the Over-the-Counter Derivatives Markets Act, the Consumer Financial Protection Agency Act, the Private Fund Investment Advisers Registration Act, and the Accountability and Transparency in Rating Agencies Act, and the Federal Insurance Office Act.

Among other things, the House bill maintains an exemption for companies with less than $75 million in public float (non-accelerated filers) from the auditor attestation provision under Section 404(b) of Sarbanes-Oxley.

Currently, those companies have been exempted from the provision by the Securities and Exchange Commission, but are slated under SEC rules to begin complying with 404(b) for fiscal years ending on or after June 15, 2010. When it announced that extension in October, the SEC said it would be the last one.

The exemption, offered in an amendment by Reps. John Adler and Scott Garrett, was approved by the House Financial Services Committee in November against the wishes of committee Chairman Barney Frank. House lawmakers voted 271-153 to defeat an attempt to remove the provision from the bill.

The SEC had no comment on the bill beyond a Dec. 11 statement by Chairman Mary Schapiro, which said, "I applaud the House for taking this historic step to bolster investor protections and fill gaps in our financial regulatory framework. I look forward to continuing to work with Congress on this very significant legislation."

The Adler-Garrett amendment also asks the SEC and Government Accountability Office to conduct a study to determine how the SEC can reduce the burden of complying with Section 404(b) for companies whose market capitalization is between $75 and $250 million.

The bill approved by the House also provides for an annual shareholder advisory vote on executive pay and golden parachutes for top executives and affirms the SEC's authority to prescribe rules to allow shareholder access to corporate proxies to nominate director candidates.

Among other things, it would create a controversial new Consumer Financial Protection Agency that would police consumer credit products like mortgages and credit cards, and an inter-agency Financial Stability Council to identify and regulate systemically risky financial firms that should be subject to heightened oversight, standards, and regulation.

The Act would also require financial firms with at least $1 billion in assets to disclose their incentive-based compensation structures to federal regulators, who will be authorized to ban any inappropriate or risky compensation practices that pose a threat to the financial system or the broader economy. It would also create a whistleblower bounty program with incentives to identify wrongdoing in the securities markets and reward individuals whose tips lead to successful enforcement actions. The bill also calls for an independent study of the entire securities industry to identify reforms to improve investor protection.

The House Financial Services Committee has posted a summary and highlights of the bill. Compliance Week will provide readers with detailed coverage in an upcoming edition.

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