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A bipartisan pair of U.S. senators want to give Wall Street’s top cop more power to recover funds for burned investors, the Wall Street Journal reported. The legislation, to be introduced today, would allow the Securities and Exchange Commission to recover money for harmed investors based upon wrongdoing that occurred as much as a decade ago. The measure would help restore some of the muscle the SEC lost when the Supreme Court unanimously decided in 2017 that federal regulators are bound by a five-year statute of limitations. Sens. John Kennedy (R-La.) and Mark Warner (D-Va.) said that the bill would give the SEC more time to spot hard-to-detect financial crimes. “Financial fraudsters can sometimes go on for years, even decades, before they finally get caught,” Warner said in a written statement. “They shouldn’t be able to rip off investors just because some arbitrary five-year window has expired.” Last year, SEC Chairman Jay Clayton told a House committee that regulators should have the authority to seek restitution for harmed investors beyond the five-year window.

Sen. Tammy Baldwin (D-Wis.) and Rep. Bill Pascrell (D-N.J.) on Wednesday reintroduced legislation to end the carried-interest tax break that benefits investment-fund managers, criticizing President Trump for failing to end the "loophole" in his tax law despite pledging to do so during the 2016 election, The Hill reported. The carried interest tax break allows some investment managers, such as private-equity fund managers, to have certain income taxed as capital gains rather than as ordinary income. The top rate on capital gains is 23.8 percent, including an investment tax for high earners created under ObamaCare, while the top rate for ordinary income is 37 percent. Under the Democrats' legislation, carried-interest income would be taxed at ordinary-income rates instead of at capital gains rates. Trump had called for an elimination of the carried-interest tax break when he ran for president. But the tax-cut law he signed in December 2017 did not end the tax preference. Instead, the law required investment managers to hold assets for at least three years in order to qualify for the tax preference, up from one year under previous law. Democrats argue that the carried-interest preference should be eliminated because it allows investment-fund managers to pay a lower tax rate than middle-class workers.

S&P Global's LCD News found in analysis that despite mounting concern from high-profile regulators concerning the asset class, the default rate on U.S. leveraged loans just dipped to 0.93 percent, its lowest level in almost seven years, Forbes reported. The current rate is down from the already-low 1.62 percent in February. The cause for that relatively steep drop is not a dramatic decrease in loan issuers filing chapter 11 — indeed, defaults have been scarce for years as booming corporate earnings and easy access to credit buoyed all but the most troubled speculative-grade borrowers — but a benchmark name falling off the rolling 12-month calculation on which the default rate is based, according to the analysis. iHeart this month exited the default rate calculation. When the broadcast and internet radio concern filed chapter 11 last March it did so with some $6.3 billion in outstanding term debt, making it one of the largest leveraged loan bankruptcies ever. That filing helped boost the default rate to 2.42 percent at the time, a three-year high, according to LCD's Rachelle Kakouris.

State pension funds have historically taken stands against controversial industries, like firearms and tobacco, sometimes divesting their investments to push companies to act. But in the opioid crisis, which has generated hundreds of lawsuits seeking to hold manufacturers and distributors accountable, the funds have mostly stayed on the sideline so far, Bloomberg News reported. Some of the biggest ones, including New York and California pension funds, hold investments in Endo International, the largest maker of opioids after privately held Purdue Pharma LP. Even in West Virginia, which has been racked by opioid-related deaths, the state pension fund has a $1.8 million equity stake in Endo. The opioid investments, to be sure, are tiny relative to the funds’ overall assets. And pension fund members may not know they are invested in the opioid industry. Many fund investments are held through indexes, which are passive vehicles, said Keith Brainard, research director for the National Association of State Retirement Administrators. The New York State Teachers’ Retirement System, which manages about $122 billion, holds $3.1 million in Endo stock, about 75 percent through passively held indexes, a spokesperson said. Funds including California’s and New York’s say they generally oppose divesting from controversial companies because it doesn’t change corporate behavior. Instead, they say they try to engage with management through activist measures. The California State Teachers’ Retirement System, CalSTRS, has been active with a group called Investors for Opioid Accountability, which represents 54 institutions. New York’s fund said it has asked opioid manufacturers to address potential financial, legal and reputational risks.

Wall Street banks and hedge funds are closing in on a fix that they hope will clean up an $8 trillion portion of the derivatives market that’s gained a reputation for being one of the shadiest corners in finance, Bloomberg News reported. At issue are a number of transactions in recent years in which powerful investment firms have been accused of earning big money from swaps trades by enticing companies to miss bond payments they could otherwise make. The practice has eroded market confidence, triggered legal fights and led to scrutiny from regulators. At issue are a number of transactions in recent years in which powerful investment firms have been accused of earning big money from swaps trades by enticing companies to miss bond payments they could otherwise make. The practice has eroded market confidence, triggered legal fights and led to scrutiny from regulators. After months of negotiations, titans including Goldman Sachs Group Inc., JPMorgan Chase & Co., Apollo Global Management and Ares Capital Corp. have agreed to a plan that’s intended to ensure defaults are tied to legitimate financial stress, not traders’ derivatives bets. An industry trade group, the International Swaps and Derivatives Association, may propose the overhaul as soon as Wednesday. The revamp would affect credit-default swaps, instruments that contributed to the 2008 financial crisis that insure against a bond issuer’s bankruptcy or failure to pay. But the fix is limited to one type deal, so-called manufactured defaults, and it remains unclear whether it will bolster confidence in a corner of the market that critics say has become a playground for creative traders and lawyers.

Fidelity Investments is facing more scrutiny over fees it charges some mutual funds for using its platform to access retirement plan customers, Bloomberg News reported. The Massachusetts Secretary of the Commonwealth said its securities division sent a letter on Feb. 27 to Boston-based Fidelity requesting information about those fees. The inquiry follows a Feb. 21 lawsuit against Fidelity by an investor in T-Mobile USA Inc.’s 401(k) plan that claims the firm conceals so-called infrastructure fees. The fees are also being probed by the U.S. Labor Department, the <em>Wall Street Journal</em> reported last week. The state securities division is overseen by Secretary of the Commonwealth William Galvin, who has played a key role in policing the mutual fund and securities industries. In 2002, along with then-New York Attorney General Eliot Spitzer, his office was a linchpin in probing whether Wall Street firms misled investors with biased investment research. In an agreement with state, federal and industry groups several firms agreed to pay $1.4 billion to settle such claims. Fidelity wasn’t involved in that case. Fidelity had $2.4 trillion in assets under management as of Dec. 31.

The Labor Department is investigating Fidelity Investments over an obscure and confidential fee it imposes on some mutual funds, the Wall Street Journal reported. The annual charge, which Fidelity calls an infrastructure fee, is aimed at companies selling shares on the asset manager’s fund platform, and was described in a 2017 internal Fidelity document. The fee, which appears to have been implemented in 2016, is “designed to ensure that each Fund Firm meets a minimum required payment to Fidelity.” By marking the charge as an infrastructure fee, the fund firms may be able to avoid disclosing it to investors. Fund companies that decline to pay the amount will “be subject to a very limited relationship” with the company, the document says. Funds can either pay the fee themselves or push the cost onto investors in the mutual fund. This can increase the overall fees of a fund, causing individual investors to pay more and dent returns.