On June 8, the United States House of Representatives passed the Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act of 2017, which would repeal and replace the Dodd-Frank Regulatory Reform and Consumer Protection Act of 2010. In the battle of catchy monikers for legislation, the CHOICE Act seems like a clear winner. Substantively, however, it is far less clear which Act is likely to be successful in promoting “the financial stability of the United States by improving accountability in the financial system,” one of the stated goals of the Dodd-Frank Act.
Although passage of the CHOICE Act by the US Senate is uncertain (some would say doubtful), some of the provisions contained in that act could garner bipartisan support.
Introduced by Representative Jeb Hensarling (R - Texas), Chairman of the House Financial Services Committee, the CHOICE Act purports to relieve financial institutions from regulations that create more burdens than benefits, in exchange for meeting higher, but simpler, capital requirements. But the CHOICE Act goes beyond simply repealing the Dodd-Frank Act by reforming regulatory requirements impacting most aspects of the financial services industry.
For example, the CHOICE Act would repeal the recently enacted Department of Labor “fiduciary rule” and also would eliminate the requirement that certain advisers, such as private equity management firms, register with, and be regulated by, the US Securities and Exchange Commission.
Representative Hensarling has gone on record as stating his belief that none of the promises that the Dodd-Frank Act made have come true. Many institutional investors and consumer groups, however, would disagree. A June 12, 2017 article by Arleen Jacobius in Pensions & Investments reports that the “board of the $206.5 billion California State Teachers’ Retirement System . . . voted June 8 to oppose the CHOICE Act.” CalSTRS CEO Jack Ehnes said in a written statement quoted in the Jacobius article: “The Financial CHOICE Act is shrouded in rhetoric about fixing the United States economy and lifting the regulatory burden on our financial institutions . . . . On the contrary, this bill actually decimates the Securities and Exchange Commission’s ability to protect investors.”
It would appear that the competing financial industry legislation mirrors the deep political and philosophical divisions facing our nation and, indeed, many other countries. Whether the current Administration can achieve a regulatory middle ground which will prevent bank failures without the need for bailouts, while also sufficiently protecting investors and consumers, will continue to be hotly debated. We will, of course, continue to closely monitor and analyze the CHOICE Act and the ever-changing financial services regulatory landscape.