As reported this morning by TheHill.com’s On the Money finance and economy blog, lawmakers finalizing Wall Street overhaul legislation are set this week to take up the hardest issues remaining in the 2,000-page bill.

The 43-member House-Senate conference committee last week worked through some differences between the House and Senate versions, but put off  dealing with several of the toughest issues, including the four issues expected to headline the coming talks this week:

1. Derivatives spin-off: Big banks are lobbying hardest against a provision in the Senate bill that would require banks to push out their derivatives trading desks.
2. Volcker rule: Banks are also lobbying intensely against the controversial provision that would ban proprietary trading at banks and limit their ability to sponsor or co-invest with hedge funds and other alternative funds. Democratic Sens. Carl Levin (Mich.) and Jeff Merkley (Ore.) want to strengthen the rule by making it more explicit in the legislation. They expressed confidence Thursday that lawmakers were generally headed in their direction.
3. Interchange fees: The conference is slated Tuesday to consider whether the Federal Reserve should have the authority to set “reasonable and proportional” fees paid by merchants and retailers to banks and credit unions that issue debit cards. Senate Majority Whip Dick Durbin (D-Ill.), the main backer of the provision, is pushing hard to keep it in the final legislation. The House bill did not include the provision. Small banks and credit unions are lobbying aggressively against it, while merchants and retailers are pushing for it to remain.
4. Auto dealer exemption: Auto dealers have lobbied for more than a year for an exemption from a new consumer financial protection regulator. They won their case in the House in December, but the Senate bill did not include the exemption.

In addition, certain of the issues the conference committee took up last week were not fully resolved, including:

1. Broker-Dealer Fiduciary duty: The House and Senate are split on whether broker-dealers and insurance agents should have the same fiduciary duty to their clients as financial planners. The House bill extended the fiduciary duty; however, the language in the Senate bill contains a mandate for an SEC study on the issue, but would delay reform while the study is conducted and would withhold authority from the SEC to deal with brokers who provide investment advice. The Investment Adviser Association (a not-for-profit organization that exclusively represents the interests of SEC-registered investment adviser firms), together with consumer groups, state regulators and financial planners, co-signed a letter last week urging House and Senate conferees to adopt the House language that extends the fiduciary duty standard of care to all financial professionals who give investment advice.
2. Proxy access: The Senate is pushing to significantly scale back a provision that would grant shareholders stronger power to name directors on corporate boards (a longtime goal of shareholders and institutional investors), by limiting proxy access to shareholders who collectively own at least 5 percent of outstanding shares.
3. State insurance regulations: The House and Senate are divided on the power of a new federal insurance office to negotiate international insurance agreements and then pre-empt state regulations.

Although the fate of the Volcker Rule is far from certain as the House and Senate continue to hammer out their differences on the U.S. financial regulation overhaul, it appears that some banks are starting to deal with the notion that some form of the Volcker rule will become a reality.

As reported today by  FINalternatives, banks are sounding less confident that the final financial regulation bill will allow them to continue to hold on to all of their alternative investment businesses.  Please refer to the FINalternatives article for more on this story.

For a related Compliance Avenue post on this topic, please refer to “Volcker Rule May Survive“, which was posted earlier this week.