Republican Lawmaker Wants Dodd-Frank Rewrite
Legislation proposed by the House Financial Services chair could be a boon for advisors by stripping away the power of the SEC in its dealings with the industry, Financial Advisor magazine writes. But the proposal could also make advisors liable for far bigger fines for egregious offenses, according to the publication.
The proposal from Jeb Hensarling (R-Texas), dubbed the Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act, would drastically alter the Dodd-Frank Act, which the lawmker has called “a grave mistake that has failed,” according to Financial Advisor Magazine. The legislation is unlikely to become law in the current political environment but could serve as a “starting point” were the Republicans to keep control of the legislature, according to the publication.
The legislation would move enforcement proceedings from SEC administrative judges, who the publication writes rule in favor of the agency in 90% of cases, to federal courts.
In an interesting twist, the SEC would lose its ability to ban mandatory arbitration clauses in advisors’ contracts with clients, preventing the latter from taking cases to courts, Financial Advisor magazine writes.
Furthermore, Hensarling’s proposal is aimed at slowing the pace of advisor regulation changes by forcing the SEC and other federal regulators to perform rigorous cost-benefit analyses on any proposed regulation, according to the publication. The legislation would also broaden the definition of accredited investors, letting advisors target more potential clients with private fund offerings, Financial Advisor magazine writes.
However, the news would not be all good for advisors. Hensarling proposes to increase maximum fines on advisors and firms guilty of fraud, manipulation or deliberate defiance of financial regulations, such as insider trading, according to the publication.
The SEC would also be able – for the first time – to dole out fines equal to investor losses, Financial Advisor magazine writes.
The legislation would also rename the Consumer Financial Protection Bureau to the Consumer Financial Opportunity Commission and remove its authority to ban financial products it considers abusive, such as payday loans, according to the publication. The Financial Stability Oversight Council, meanwhile, would lose its power to define financial institutions as systemically important, Financial Advisor magazine writes.