CFA News Update- April 4, 2012
Despite strong opposition from current and former securities regulators, capital markets experts, institutional investors, securities law experts, and public interest organizations, the House gave final approval last week to H.R. 3606, the JOBS Act, legislation that rolls back investor protections in the name of creating jobs. The administration actively pushed the legislation, and the president is expected to sign it. “Experts agree that this legislation will unleash a new wave of damaging investment fraud, undermine market transparency, and increase the cost of capital for the small companies it purports to benefit,” said CFA Director of Investor Protection Barbara Roper. “Unfortunately, both the administration and a bipartisan majority in Congress have chosen to ignore those warnings and push forward with this ill-conceived and harmful legislation.”
Early on, it appeared that the Senate might make a serious effort to improve the bill. Ultimately, however, Senate Majority Leader Harry Reid (D-NV) announced that the Senate would take up the House-passed bill rather than draft its own more investor-friendly version. The alternative, drafted by Senators Jack Reid (D-RI), Mary Landrieu (D-LA), and Carl Levin (D-MI), was instead offered as an amendment under a procedure requiring it to win 60 votes to pass. CFA and Americans for Financial Reform wrote in support of the amendment, which as expected fell six votes short of the 60 needed to end debate. “The White House, which pushed for passage of a bipartisan bill regardless of its attack on investor protections, and Senate leadership, which brought the bill to the floor with no meaningful opportunity for pro-investor amendments, bear a heavy burden of responsibility for the damage this bill will cause to vulnerable investors and our fragile capital markets,” Roper said in a press statement on Senate passage. “Unfortunately, it is the public who will suffer the consequences.”
In her statement, Roper praised the 26 senators who voted for the substitute amendment and against final passage of the bill when the amendment failed. These senators “deserve credit for taking a stand to protect investors, prevent fraud, and promote market transparency and integrity,” Roper said. “When, as predicted, this legislation unleashes a new wave of investment fraud on the unsuspecting public, these senators, and particularly Senators Reed, Landrieu, and Levin, will know that they did everything in their power to stop it.”
After defeating the substitute amendment, the Senate adopted a narrower amendment to strengthen investor protections related to “crowd-funding” provisions, which allow start-up companies to raise up to $1 million in seed capital over the Internet from large numbers of individuals. That version of the legislation was then adopted by the House last week and sent to the president for his signature. “While we strongly supported the pro-investor amendment on crowd-funding and are grateful it was adopted, this change alone was insufficient to justify support for the broader bill,” Roper said.
The Obama Administration has appealed a World Trade Organization (WTO) ruling on country-of-origin food labeling, winning praise from CFA and other consumer organizations. Implemented in 2009 after years of advocacy by consumer and farming groups, the COOL law provides consumers with basic information about the origin of meat products, fish and seafood, fresh and frozen fruits and vegetables, and certain nuts. In November, a WTO panel affirmed the right of the United States to require country-of-origin labeling for meat products, but considered some provisions as barriers to trade. “U.S. consumers overwhelmingly support country of origin labeling,” said Chris Waldrop, Director of CFA’s Food Policy Institute. “We are pleased that the Administration recognizes the importance of providing consumers with this information and will defend our country-of-origin labeling law before the WTO.”
A year after a new consumer product safety database began accepting postings, an analysis by CFA and Kids in Danger (KID) shows the database functioning as intended, providing potentially life-saving information to consumers and the Consumer Product Safety Commission. The analysis covered the 6,080 reports filed during the first ten months of database operation. “Our analysis of the database shows that consumers and the CPSC now have access to useful information about many types of consumer products – information that was not available to the public before. Consumers are no longer completely left in the dark about product safety and have access to lifesaving information,” said CFA Senior Counsel Rachel Weintraub.
The CFA/KID analysis found that almost all of the reports in the database (97 percent) were filed by consumers. Reports by medical professionals made up only 0.46 percent of all reports, while reports by medical examiners and coroners made up only 0.2 percent, and reports by other public safety entities made up 1.0 percent. This suggests that “more should be done to reach out to medical experts and others to ensure that they are aware of the database,” Weintraub said. The analysis also found that: the information provided to the database is overwhelmingly specific, with 84 percent of all reports including a serial number or model name or number; manufacturers exercised their right to post additional comments on 53 percent of reports; and most reports (70 percent) involved products purchased in the last five years, not older products.
The first-year experience is a clear success, Weintraub said. “In its first year, SaferProducts.gov has proven that it is a useful tool. Now, CPSC can continue their efforts to increase users and streamline the process to make it an even more effective for manufacturers, consumers, researchers and CPSC itself,” she said.
The recent controversy over lean, finely textured beef (LFTB) – dubbed “pink slime” by its critics – could undermine food safety, warned Chris Waldrop, Director of CFA’s Food Policy Institute. Since an ABC News report quoted former U.S. Department of Agriculture scientists recommending against using the product in ground beef, the company that produces LFTB, Beef Products Inc. (BPI), has been forced to suspend operations at three plants. “Eldon Roth and BPI are recognized as industry leaders in food safety. The company pioneered food safety interventions to significantly reduce the risk of the LFTB product they produced,” Waldrop said. “CFA is concerned that manufacturers of hamburger patties may replace LFTB with something that has not been processed to assure the same level of safety. We are also concerned about the potential chilling effect this recent controversy may have on companies who seek to apply innovative solutions and new technologies to enhance food safety,” he added.
Over 250 consumer advocates, policymakers, industry representatives, and members of the media gathered in Washington, D.C. in mid-March for CFA’s 46th annual Consumer Assembly. The conference featured keynote speeches from: Sen. Richard Blumenthal (D-CT); award-winning author and Columbia Graduate School of Journalism Professor Thomas B. Edsall; Gary Guzy, Deputy Director and General Counsel of the White House Council on Environmental Quality; Daniel Weitzner, White House Deputy Chief Technology Officer for Internet Policy; Tony West, Acting Associate Attorney General with the Department of Justice; Scott Keeter, Pew Research Center Director of Survey Research; and Jim Guest, President and CEO of Consumer Reports.