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Revised Financial Choice Act Targets SEC on Several Fronts

House Financial Services Committee Chairman Jeb Hensarling recently released a revised version of the Financial CHOICE Act, which lawmakers are expected to vote on this week. “Republicans are eager to work with the President to end and replace the Dodd-Frank mistake with the Financial CHOICE Act because it holds Wall Street and Washington accountable, ends taxpayer-funded bank bailouts, and unleashes America’s economic potential,” Hensarling said. A recent article by Sullivan & Cromwell LLP lawyers (subscription required) presents a comprehensive overview of the Financial Choice Act’s revisions. Among the various provisions of the revised bill are proposals setting forth new requirements on the SEC including:

  • establishing a process under which an individual who has been issued a written Wells notice may make an in-person presentation before the SEC and be represented by counsel at the presentation;
  • increasing certain monetary penalties, penalties for insider trading;
  • streamlining the exemptive relief process for new products under the 1940 Act, including for exchange-traded funds,
  • amending Section 36(b) of the 1940 Act to require that investor lawsuits against a fund under the section’s private right of action be stated with particularity and proven by clear and convincing evidence;
  • requiring that, if the DOL chooses to adopt a fiduciary rule, the definition of what constitutes fiduciary investment advice and the prescribed standards of care and conditions must be “substantially identical” to those in any rule the SEC adopts regarding standards of conduct for brokers, dealers and advisers; and
  • prohibiting the SEC from requiring a universal ballot and restricting shareholder proposal rules.