Financial Reform Legislation Presents Opportunity for Ombuds

As the U.S. Senate grapples with legislation that would overhaul financial regulation, two proposed ombuds programs could become an issue for lawmakers. The recently approved House bill would create ombuds programs for the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB). As currently drafted, the Senate bill does not.

In December, the House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009 (HR 4173), which included new Ombuds programs for the SEC and PCOAB. The SEC Ombuds would act as a liaison between the SEC and anyone by SEC regulatory activities, advising the SEC and individuals regarding compliance with Federal securities laws, and maintain confidentiality of communications with individuals. The PCAOB Ombuds act in a similar role for the PCAOB and registered public accounting firm with respect to PCAOB the regulatory activities, including the duty to preserve confidentiality. As such, the proposed Ombuds programs would would be similar to the Office of the Ombudsman for the Financial Industry Regulatory Authority, a robust program supported by the Securities and Exchange Commission.

John Zinsser, an experienced ombuds practitioner and ADR consultant, explains why organizational ombuds are an effective tool to provide oversight and improvement for the financial services sector.

Programs designed to current ombuds profession standards could be fully operational in the investment community in a matter of months, providing significant cost savings, superior creative problem-solving, and expanded communications — the essential attributes for financial firms to overcome the current macro and micro challenges they face. As these improvements become visible to investors, along with the heightened compliance and increased transparency brought about by ombuds activity, the essential process of rebuilding trust in the financial services community via accountability, in the largest sense of the word, can begin. (Conflict Benefit Blog.)

Although NASDAQ, America's Community Banker's and others in the financial services industry have been calling for ombuds program for years, the pending Senate bill (S 3217, "Restoring American Financial Stability Act of 2010") does not mention any role for Ombuds. If the Senate bill is passed, a conference committee would need to resolve the differences between the two bills, including the proposed ombuds programs. If this were to come to pass, it would significant boost the profile of ombuds as resource for addressing conflicts and systemic risk.

Read more at the Ombuds Blog.

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