Washington -- Lee Mayfield still gets the chills when sh
recalls her brush with financial disaster in the late 1980s. She and her husband had been told by a financial adviser to sell her husband's life insurance policy and to invest the money in mutual funds.
Through blind luck -- the Mayfields did not properly cancel the policy, leaving it in effect -- they held onto their insurance.
A year later, Mr. Mayfield was dead at age 50 from pancreatic cancer.
"That would have been it. An $80,000 policy lost," Mrs. Mayfield says. "I don't know what I would have done."
Although the Mayfields lost at least $30,000 through the financial planner's dubious advice and undisclosed commissions, she was spared further damage. Today, she's using the insurance money to study for a career as a research librarian in her hometown of Chapel Hill, N.C.
Mrs. Mayfield's tale was one of many heard recently as Congress began debating new proposals to regulate advisers and other segments of the financial industry. Unlike previous years, when such proposals were killed by partisan squabbling, several bills are moving through Congress -- marking the end of the go-go 1980s and the deregulation that accompanied it.
"The Republicans have controlled the White House and the government for 12 years and much of the past two decades, but they didn't slay the urge to regulate. That beast still exists and we're seeing it slowly come back to life," said Mark Melcher, director of Washington research for Prudential Securities Inc.
More far-reaching regulations could come from the Securities and Exchange Commission, which is expected to gain a Democratic majority within the coming months. Another relatively independent agency moving into the Democrats' sights: the Federal Reserve, which regulates banks and controls the money supply. Proposals call for greater political control of the Fed, as well as a possible merger of all banking regulation agencies.
Making over the SEC and changing the Fed aren't likely to take place immediately. But the Democrats' control of Congress and the White House will spark a rush of legislation -- including the measure to regulate financial advisers -- in the coming months.
Among the bills slated for early consideration is one that would regulate sales of government securities. Since the 1991 Salomon Brothers scandal surrounding the auction of those securities, Congress has been trying to break the closed circle of dealers in the $3 trillion market. The proposal, authorizing the SEC to make rules regulating the market, probably has enough votes to pass.
