Financial CHOICE Act of 2017

June 09, 2017
Financial Regulation Reform Tracker

Congress and the Trump Administration may be embarking on making far-reaching changes that will recalibrate the manner in which financial services are regulated in the United States, including amending the Dodd-Frank Act and its implementing rules. We expect to see vigorous debate regarding the appropriate approach to financial services regulation, leading to rewrites of the structures and goals of federal banking and securities agencies and other government agencies.

Dechert Financial Regulation Reform Tracker for Financial CHOICE Act of 2017

This page is dedicated to tracking legislative and regulatory developments related to the Financial CHOICE Act of 2017.

For more information, please contact David L. Ansell, Brendan C. Fox, K. Susan Grafton, David J. Harris, Philip T. Hinkle, Andrew L. Oringer, Corey F. Rose or Robert J. Rhatigan.

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Financial CHOICE Act of 2017 (H.R. 10)

Sponsor: Rep. Jeb Hensarling (R-TX)

House Financial Services Committee passed 34-26, May 4, 2017.

Placed on the Union Calendar, May 25, 2017.

House of Representatives passed 233-186, June 8, 2017.

Key Provisions

The bill would make substantial changes to the federal regulation of financial services. Among other things, the bill would:

Repeal the Orderly Liquidation Authority provisions of the Dodd-Frank Act and establish new Bankruptcy Code provisions for large bank holding companies and nonbank financial companies. (Titles I, II)

Streamline the living will process for large bank holding companies and nonbank financial companies by, among other things, requiring living will submissions no more frequently than every other year. (Title I)

Repeal significant elements of the FSOC’s authorities, including its authority to designate nonbank financial companies as SIFIs. (Title III)

Repeal the Volcker Rule. (Title IX)

Allow banking organizations that meet certain capital requirements to elect a status that would exempt the organization from a range of laws and regulations regarding capital, liquidity, capital distributions and restrictions on mergers and acquisitions. (Title VI)

Repeal the Department of Labor's new Fiduciary Rule, require further rulemaking on the point to await and be coordinated with similar SEC rulemaking and provide specified standards to be applicable to SEC rulemaking regarding certain fiduciary matters. (Title VIII)Revise Section 36(b) of the Investment Company Act of 1940 to heighten the pleading standards and burden of proof in cases brought by mutual fund shareholders against investment advisers alleging breaches of fiduciary duty. (Title VIII)

Take a range of actions to facilitate capital formation. (Title IV)

Make a series of changes to federal securities laws and SEC operations and require harmonization of the SEC and CFTC regulatory framework for swaps to improve the functioning of the capital markets. (Title VIII) Enhance penalties for securities and banking law violations. (Title II)

Impose a series of new requirements on rulemaking by federal financial agencies. (Title III)

Renames and restructures the CFPB to be a consumer regulatory enforcement agency that will no longer have supervisory authority. The CFPB will be renamed the “Consumer Law Enforcement Agency” and will be led by a single director that may be removable by the President without cause. The agency will not have any authority to enforce unfair, deceptive or abusive acts or practices (also known as UDAAP). (Title VII)

Potential Impact

A prior version of the bill was approved by the House Financial Services Committee in September 2016 but was not considered by the full House.

The bill would repeal significant aspects of the Dodd-Frank Act and seek to considerably restrict future rulemaking activity by federal financial regulatory agencies. It would take a range of actions intended to improve the capital markets and enhance capital formation.

While prospects for the bill are favorable in the House, there is no assurance that the bill would gain traction in the Senate. Under the current 60 vote threshold for Senate action on major controversial legislation, cooperation from a number of Senate Democrats would be needed in order for the Senate to approve some form of substantial financial services legislation.

Nevertheless, the bill may well serve as a launching pad for the continuing discussion by the Administration and Congress about regulatory reform that seems likely to consume much time and attention over the coming weeks and months.

Important Links

Discussion Draft text

Amendment in the Nature of a Substitute (May 2, 2017)

Bill Text as Reported in the House (May 25, 2017)

H.Rpt. 115-153 (May 25, 2017), as supplemented (June 2, 2017)

See Dechert OnPoint, Updated CHOICE Act Proposes to Impose Heightened Pleading Requirement and Raise Burden of Proof for Plaintiffs in Section 36(b) Cases Against Mutual Fund Advisers

See Dechert OnPoint, Shareholder Proposal Reform under the Financial CHOICE Act of 2017: A Welcome Development for Companies or a Trojan Horse?