Update of Dodd-Frank Act rewrite to be released soon
House Financial Services Committee Chairman Jeb Hensarling is set to release an updated version of his sweeping bill to rewrite the Dodd-Frank Act “in the next few weeks,” according to a committee spokesperson.
The latest version of the Financial Choice Act contains a host of changes over the original, including broader exemptions for small companies from the auditor attestation requirements in Section 404(b) of the Sarbanes-Oxley Act of 2002.
The long-awaited measure is expected to encounter staunch opposition from Democrats, who hold enough seats in the Senate to filibuster major efforts to repeal Dodd-Frank. Senate Republicans are likely to have their vision for amending the post-crisis reforms, which they have yet to release.
Last year, the 500-plus page Financial Choice Act cleared the Financial Services Committee but never reached the House floor. Hensarling, a Texas Republican, has delayed reintroducing the measure this year as the House’s GOP leadership dealt with other priorities, such as replacing the Affordable Care Act.
In an emailed statement to reporters on April 11, 2017, a committee spokesperson suggested the release of the updated bill is imminent.
“Our plan, which will be released in the next few weeks, is a bold and visionary plan that protects consumers by holding Wall Street and Washington accountable, ends bailouts and unleashes America’s economic potential,” the spokesperson wrote. Hensarling “looks forward to working with the president and his administration to eliminate Dodd-Frank and replace it with the Financial Choice Act.”
The Choice Act would free banks that maintain strong balance sheets from certain capital and liquidity requirements and federal supervision, while abolishing Dodd-Frank’s “orderly liquidation authority” that provides an alternative to bankruptcy for troubled banks and brokerages. The bill, among other provisions, would place new checks on financial regulators and ease disclosure, accounting and capital formation rules on companies. It also expands the number of companies eligible for exemptions from Section 404(b) of Sarbanes-Oxley.
Section 404(b) requires public companies to hire an outside auditor to review and report on management’s assessment of internal controls over financial reporting (ICFR).
Today, a company is exempt from the Section 404(b) provision if it qualifies as a so-called nonaccelerated filer, with a public float of less than $75 million. Also exempt are emerging growth companies (EGCs) under the JOBS Act, which must have less than $1 billion in annual revenue.
The updated Choice Act would exempt public companies with a market value of as much as $500 million, or banks with up to $1 billion in assets, from Section 404(b) compliance. The original Choice Act set that market cap threshold at $250 million.
Hensarling’s bill, while gutting Dodd-Frank, would also expand the availability of JOBS Act provisions. Under the Choice Act, the JOBS Act’s confidential filing provisions for initial public offerings, today only available to EGCs, would be made available to all companies seeking to register their shares for the first time. Private companies seeking to raise capital through the Regulation A exemption of the Securities Act of 1933 would be able to raise as much as $75 million a year, $25 million more than allowed under the JOBS Act.
Democratic lawmakers dug in on the news that a new Choice Act was on its way. Rep. Maxine Waters, a Democrat from California, said Hensarling’s bill “will essentially kill the most important aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was designed to prevent another financial crisis.”
“The new version, which is even worse than Chairman Hensarling’s first draft, cannot be allowed to become law,” Waters said in the statement. “There is too much at stake for consumers and for our economy at large.”
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