Chair Hensarling and the House of Representatives’ Financial Services Committee on Thursday May 4, 2017 completed mark-up of the Financial CHOICE Act (“FCA”) and reported out the bill to the House along party lines by a 34-26 vote. If enacted, the FCA would significantly amend the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 (“DFA”) and other banking and securities laws. Among many other changes, the FCA would eliminate the systemic risk regulation program for non-banks under Titles I, II and VIII of the DFA and provide relief from DFA-imposed requirements for qualifying strongly-capitalized banks, as well as low risk and community banks. The FCA would also curtail the authority of the Consumer Financial Protection Bureau (“CFPB”), repeal the Durbin Amendment cap on debit card fees charged to merchants, roll back mortgage regulation, limit the credit risk retention rule to securitizations of home mortgages, and repeal the statutory authority for the SEC to impose restrictions on conflicts of interest in securitizations.
The FCA would make other significant changes to regulatory programs of interest to securities firms. For example, the FCA would broaden Investment Advisers Act and Investment Company Act exemptions for managers of venture capital and private equity funds, repeal the Department of Labor’s “fiduciary rule” for IRA accounts and require Congressional review of SEC efforts to harmonize fiduciary standards applicable to broker-dealers and investment advisers, and repeal the Volcker Rule (which subject to certain exemptions prohibits short-term trading in most securities and derivatives by banks and their affiliates and investment in and sponsorship of private investment funds by banks and their affiliates.
The FCA would also impose a number of structural changes on the SEC, streamline the process for issuance of securities, and increase the statutory limits on SEC fines on violators.
The FCA would also make administrative law changes that would greatly increase Congressional oversight and judicial review of future SEC and other financial regulatory agency rulemaking.
The FCA is expected to be approved by the House of Representatives in the coming weeks. The Senate is expected to consider more narrow bi-partisan reforms rather than legislation as sweeping as the FCA, and that likely will not occur until 2018.