The CFA Institute said on Tuesday that it strongly supports many of the items contained in the financial industry regulatory reform bill proposed by the chair of the U.S. Senate Banking Committee, Chris Dodd.

However, the CFA Institute warned that the financial industry, and other lobbyists, will inevitably try to water down some of the provisions contained in the bill.

“The important test for lawmakers will be whether they can ‘hold the line’ for these important investor protections,” said Kurt Schacht, managing director at CFA Institute. “We expect that banking and other special interests will do their level best to strip many of these important protections from the final bill.”

“For example, we are troubled to see the Senate legislation propose only a study on the need for a single fiduciary duty standard,” he said. The CFA Institute calls for a single standard for providers of investment advice.

Notwithstanding that disappointment, Schacht noted that the bill does address three areas that it feels are critical to avoiding a repeat of the financial crisis.

“First, having a properly structured oversight body for systemic risk is critical. In our view, confidence in the U.S. markets can be greatly improved by having the right combination of expertise and authority for effective detection, mitigation, and resolution of systemic risk problems,” he said, adding, “We were pleased to see that the Senate bill includes an independent research office that will collect and analyze data to inform the Financial Stability Oversight Council’s actions on overseeing systemic risk.”

“Second, we are delighted to see proposals that clarify bank regulatory responsibilities, limit proprietary trading risks, and implement more dynamic and preventative margin and capital requirements during changing market conditions,” said Schacht. “This coupled with legislation that closes the gaps in OTC derivatives regulation and the introduction of a process to reduce the complexity and potential impact of too-big-to-fail institutions shows that the investor perspective has been given strong consideration for the first time in many years.”

Finally, he noted that proposed legislation on say-on-pay and proxy access “will go far in ensuring that public companies are truly accountable to their shareowners. CFA Institute and others have been calling for these reforms for many years to assure that shareowners can effectively exert their ownership rights.”

IE