“Stricter financial regulation won’t necessarily derail banking and other financial-services stocks, according to some investment strategists.  In fact, money managers said this week that more regulation is just what Wall Street needs after the biggest financial crisis since the Great Depression. Others note that regulation is largely aimed at the biggest banks and shouldn’t hurt an entire sector. A bill for greater financial-services oversight is slowly working its way through the Senate. Some investment analysts suggest that buyers approach the financial sector under an assumption that new and tighter regulations are a given,” Sam Mamudi Reports.

“We continue to believe that passage has largely been discounted in the share values of the large banks,” wrote analysts at Keefe, Bruyette & Woods in a note last week. “We believe that the certainty of the final bill could bring a relief rally from the uncertainty of the many proposals.”

Mamudi goes on to report, “Financial-services stocks have been big winners since the March 2009 market low. Mutual funds devoted to the financial sector are up 10% in 2010 and have gained 50% on average over the past 12 months, according to investment researcher Morningstar Inc. Among top exchange-traded funds focused on financial stocks, SPDR KBW Bank (NYSE:KBE) had gained almost 30% for the year through Wednesday and its sibling SPDR KBW Regional Banking (NYSE:KRE) was up almost 27% so far this year. Meanwhile, the most popularly traded financial-stock ETF, the Financial Select Sector SPDR (NYSE:XLF) ,is up around 13%.”

Bill Smead, chief investment officer at Smead Capital Management, owns financial stocks that he thinks will be fine under tighter rules, such as Wells Fargo & Co.(NYSE:WFC) — which he called “the least interested [big bank] in derivatives and trading” — and Bank of New York Mellon Corp. (NYSE:BK) “They just want interest rates to go up to make money from their custody accounts,” Smead said. Financial regulation won’t affect a retailer’s strategy, or how a pharmaceutical company develops a blockbuster drug, Smead added, but it might stave off a financial crisis that would hurt the broad economy.

“Financial deregulation hasn’t been the boon that investors might have expected. J.P. Morgan Chase’s stock, for example, is about even with where it was 10 years ago, while Citigroup Inc. (NYSE:C) has seen its share price plummet 90%. Even Goldman Sachs (NYSE:GS) shares are up only about 60% over the decade-long period,” Mamudi Reports.

See more details to the story: HERE

We have put together some details on the financial ETFs mentioned in the article including the top bank holdings within the ETFs below:

SPDR KBW Bank (KBE)

The investment seeks to replicate the performance of the KBW Bank index. The fund uses a passive management strategy designed to track the total return performance of the Bank index. It is nondiversified.

SPDR KBW Regional Banking (KRE)

The investment seeks to replicate the total return performance, before expenses, of the KBW Regional Banking index. The fund uses a passive management strategy designed to track the total return performance of the KBW Regional Banking index. The index is a float adjusted modified-market capitalization weighted index of geographically diverse companies representing mortgage banks, loan processors, marketing and service institutions listed on U.S. stock markets. The fund is nondiversified.

Financial Select Sector SPDR (XLF)

The Financial Select Sector SPDR® Fund, before expenses, seeks to closely match the returns and characteristics of the Financial Select Sector Index (ticker: IXM). Our approach is designed to provide portfolios with low portfolio turnover, accurate tracking, and lower costs.

Fund Top Holdings

As of04/28/2010
Name	Weight	Shares Held
Bank Of America Corporation (NYSE:BAC)	10.09%	38,797,756
Jpmorgan Chase & Co (NYSE:JPM)	9.77%	15,365,870
Wells Fargo & Co New (NYSE:WFC)	9.51%	20,035,960
Berkshire Hathaway Inc Del	7.22%	6,400,223
Citigroup Inc (NYSE:C)	4.95%	75,990,700
Goldman Sachs Group Inc (NYSE: GS)	4.67%	2,035,107
American Express Co (NYSE: AXP)	3.12%	4,629,856
Us Bancorp Del	2.88%	7,399,672
Morgan Stanley (NYSE:MS)	2.40%	5,405,759
Bank Of New York Mellon Cor	2.14%	4,674,616

KBE, KRE, XLF