As the new decade is now upon us, and as is always the case with a new year, many people are looking ahead as to what the future holds for them and their professions, including investor relations pros. Undoubtedly, our country is mired in a period like no other since the Great Depression, with strikingly similar aspects and consequences: financial crisis, high unemployment/corporate closures, government bailouts, a stock market that rallies before the economy does—and massive regulatory reform. 

Even with the new year's seemingly renewed optimism, it is hard to keep track of everything that is going on. While jumpstarting the economy and healthcare reform grab most of the headlines, there is proposed legislation that affects the financial markets more than anything, and could cause the largest change to our industry since Sarbanes-Oxley, with the potential to be much more far-reaching.

"Sweeping overhaul" was the term used to describe a new financial oversight bill that narrowly passed the House (223-202) last month, and many players in the industry, from investment managers, brokerage houses, to investor relations professionals, are chiming in with their thoughts—and fears. It should be noted that there are no changes as of today. Laws must be approved by both houses of Congress and the President. But many feel this is moot with partisan domination across the board.

Like most financial professionals, I am pro-business with a preference for laissez-faire or "hands-off" government. I am, of course, a free-market proponent, where entrepreneurs should be rewarded for the risks they take.  I also feel that our government is reactionary, and often over-reacts to concerns that later cause more problems down the road. After all, when legislation has to be written or altered, it is an admission that our present way of doing things did not work, and the last thing we should want is to have to subject our grandchildren to this again in fifty years. 

However, like many in my chosen field, I was rattled by last year's financial crisis. Many, including myself, saw it coming long before it happened. One did not have to be a business grad to see the simple warning signs. The problem now is the proverbial finger-pointing that always follows a crisis. I actually heard a banker say the other day that the meltdown is the government's fault for not regulating enough! While I am by no means anti-regulation, it should be the right kind, so one's view should depend on one's trust in the government to get it right.

That said, what do our leaders have planned for us? Following is a partial list in plain English—and admittedly, not all details are included—of some of the proposed financial regulations (source: The Los Angeles Times) with my thoughts.

1. New regulation of hedge funds and derivatives trading.This proposal has the most general, far-reaching effect on the IR profession, as many companies rely on small funds for investment. The problem here is that we do not know how far this will go yet. For instance, could funds be required to justify their investment policies and individual trades? That could spell trouble for small and microcap companies as fund managers become much more cautious. 

Granted, the secrecy behind private funds has bothered investors for years. But investment managers are against the current proposal for fear the government is stepping in where it has no experience. 

According to the CFA Institute:

"The House legislation makes several improvements, but it does not address a big concern of investors: the gap in regulation of U.S. and offshore private-fund vehicles (e.g., hedge funds and private equity and venture capital firms). The House proposes that only hedge funds with assets of more than $150 million be required to register and provide information to the SEC.

"The House bill seems to acquiesce to industry pressures and has removed oversight of a large segment of private investment managers and funds."

"The Senate has the opportunity to close these gaps in regulatory coverage. It should act to ensure that the vast majority of investment management industry be subject to some level of regulatory oversight. The most investor-friendly approach advocated by the Investors' Working Group and others is to require all private fund managers, regardless of size, to register with the SEC and disclose positions to regulators on a real-time basis."

I have to concur with my colleagues that industry professionals should be used whenever possible.   

2. The allowing of federal officials to seize and dismantle large financial institutions that are teetering on bankruptcy.This sounds risky. The obvious question is who determines what "near bankruptcy" means? The government? This seems largely subjective in nature and could potentially give the government license to overstep its bounds. If enacted, there should be clear, objective indicators (with the help of the financial community) of what this means.

3. Authorization of the government to break up large financial institutions whose collapse could pose a risk to the overall economy. Totally reactionary and potentially subjective, but could serve a purpose if implemented properly. Again, many people fear that once the government steps in, there is potentially no limit to its regulative zeal. This is certainly a concern. 

My final question regarding financial oversight is this: Is it possible to create laws and agencies that a) treat everyone fairly, b) actually protect the public and economy, and 3) do not overstep their bounds in the interest of free enterprise?

The way I see it, we are in a bit of a quandary. On the one hand, we have to determine whether business does in fact need to be protected from itself. On the other, is the government, with a spotty record of watchdog competence, the one to be the protector?    

Randy Lewis, CFA, MBA is founder and senior analyst at EquityNet Research, a boutique investment, industry and economic research firm. He is also founder of The GSL Group, LLC, a company focusing on business valuation and advisory, and an assistant professor of business at Pierce College in Los Angeles.