Obama plan seen as vote of confidence in SEC

*SEC's investor advisory board needs to be permanent

*Council needed to identify gaps in consumer protection

*Sanctions should be expanded in SEC enforcement actions

*Certain broker-dealers must have fiduciary duties

By Rachelle Younglai

WASHINGTON, June 17 (Reuters) - U.S. securities regulators would gain powers under the Obama administration regulatory overhaul, and be certain to face increased pressure to exercise its authority wisely and thoroughly as recession-battered investors demand that wrongdoers get punished.

Under the administration plan to revamp the country's financial regulation, the U.S. Securities and Exchange Commission holds onto most of its role as markets regulator and investor protector and gets new tools to police markets.

Instead, the agency would gain authority to establish a fund to pay whistleblowers -- a measure the head of the agency has been advocating. It would also gain increased power to improve and expand sanctions so that the SEC can better enforce securities laws.

Speculation had been rife that Obama would try to strip the SEC of its powers amid regulatory lapses such as the failure to stop Bernard Madoff's $65 billion fraud and its oversight of the largest investment banks. Madoff partially settled the SEC action against him on Tuesday without having to admit any wrongdoing.