United States: US House Of Representatives Approves The Financial Choice Act

On June 8, the U.S. House of Representatives voted to approve the Financial CHOICE Act (FCA) primarily along party lines, 233-186. The FCA was introduced by Rep. Jeb Hensarling of Texas, and co-sponsored by 40 of his Republican colleagues, to the House of Representatives. Some of the key provisions of the bill include the following:

  1. Repealing the Volcker Rule (Section 619 of the Dodd-Frank Act).
  2. Amending Section 13(3) of the Federal Reserve Act, governing emergency lending by the Federal Reserve, by:

    1. Narrowing the ability for financial institutions to obtain emergency lending by adding a requirement that the "unusual and exigent circumstances" must pose a threat to the financial stability of the United States and requiring the vote of nine or more Federal Reserve Bank (FRB) presidents, in addition to the already required five Board of Governor members, for lending to be approved.
    2. Requiring that any entity regulated by the Office of the Comptroller of the Currency (the "OCC"), the Securities and Exchange Commission (SEC), the Commodities Futures Trading Commission (CFTC), or the Federal Deposit Insurance Corporation (FDIC) that proposes to receive emergency lending be certified by the OCC, the SEC, the CFTC, or the FDIC, as the case may be, in writing to the Federal Reserve to be solvent. Additionally, within six months of enactment, the bill directs the Federal Reserve to adopt (1) a rule specifying the method it will use to determine the sufficiency of collateral pledged to secure lending under Section 13(3) and (2) a rule establishing a minimum interest rate on the principal amount of any loan or financial assistance extended pursuant to Section 13(3), where the applicable minimum interest rate is calculated as a 90-day average of the Federal Reserve's discount rate, plus a 90-day trailing average of the spread between a specified distressed corporate bond yield index and a specified bond yield index of debt issued by the United States. The FCA would also add a prohibition on the use of equity securities of any kind as collateral for loans with FRBs under Section 13(3).
  3. Repealing the authority of the FDIC to take certain extraordinary actions (such as indemnifying uninsured creditors of an insured depository institution) in response to serious adverse effects on economic conditions or financial stability under Section 13(c)(4)(G) of the Federal Deposit Insurance Act. In addition, repealing the authority of the FDIC to create a widely available program to guarantee obligations of solvent depository institutions, bank holding companies, thrift holding companies and their affiliates during times of severe economic stress under Section 1105 of the Dodd-Frank Act.
  4. Creating regulatory relief mechanisms for strongly capitalized and well-managed banking organizations by allowing banking organizations to elect to be treated as a "qualified banking organization" if such banking organization maintains a leverage ratio of at least 10 percent when comparing total leverage to total assets. This election allows for banking organizations to be exempted from a number of regulatory requirements, including the Basel III capital and liquidity standards and the heightened prudential standards applicable to larger banking organizations under the Dodd-Frank Act. Additionally, the leverage ratio used in calculating whether or not a banking organization meets the 10 percent threshold to elect to be treated as a qualifying banking organization will do away with risk-weighting of assets when making such measurements.
  5. Requiring that all financial regulators conduct economic analyses of all proposed and final rules to ensure the costs imposed do not outweigh the potential benefits.
  6. Revising the frequency of Dodd-Frank Act Stress Tests for banks to annually from semiannually, changing the Comprehensive Capital Analysis and Review (CCAR) submissions from annually to once every two years and expending CCAR qualitative relief to all banking organizations, which would not allow the Board of Governors of the Federal Reserve to object to an institution's capital plan on the basis of qualitative deficiencies in the capital planning process.
  7. Repealing Title II of the Dodd-Frank Act and its Orderly Liquidation Authority that establishes a liquidation regime outside of bankruptcy for large, complex financial institutions whose insolvency would pose systemic risk to the financial system (for situations similar to Lehman Brothers). Additionally, the bill would repeal the authority of the Financial Stability Oversight Council to designate nonbank financial institutions as systemically important.
  8. Prohibiting use of the Exchange Stabilization Fund for the establishment of a guaranty program for any nongovernmental entity.
  9. Amending SEC enforcement and penalty authority by:

    1. Increasing the SEC's civil penalty authority, as well as criminal sanctions under the federal securities laws for the most serious offenses. Additionally, the FCA establishes a new fourth tier of penalties for recidivist offenders that allows for tripling SEC monetary fines sought in both administrative and civil actions where penalties are tied to illegal profit-making.
    2. Giving respondents in SEC administrative proceedings the right to remove their enforcement action to federal court, as well as requiring the SEC to allow respondents to appear prior to the initiation of a formal enforcement action.
    3. Eliminating the system of automatic disqualifications and makes such disqualifications subject to the discretion of the SEC.
    4. Requiring the SEC, when issuing a civil money penalty against an issuer, to include findings that (1) the alleged violations resulted in direct economic benefit to the issuer and (2) the civil penalties do not harm the issuer's shareholders.
    5. Requiring that the SEC Chairman convene a new committee, with the same mission as the original Wells Committee, to holistically review the SEC's Enforcement Program to ensure it complies with both the SEC's mission to protect investors; maintain fair, orderly, and efficient markets, and facilitate capital formation and our constitutional due process rights.
  10. Repealing Section 921 of the Dodd-Frank Act, which gave authority to the SEC to prohibit or restrict the use of pre-dispute arbitration clauses in agreements between customers or clients and any broker, dealer or municipal securities dealer if it found it to be in the public interest and necessary for the protection of investors.
  11. Changing the name of the Consumer Financial Protection Bureau to the Consumer Law Enforcement Agency and tasking it with the dual mission of consumer protection and competitive markets, with cost-benefit analysis of rules performed by a new Office of Economic Analysis that would be created. Other changes include restructuring the agency to be under the authority of the executive branch, with a single director removable by the president at will and making the agency subject to Congressional oversight and the normal Congressional appropriations process.
  12. Repealing the directive under Section 1503 of the Dodd-Frank Act that the SEC promulgate rules requiring mining companies to disclose certain safety information in their quarterly and annual reports, including significant violations, orders, and citations, along with the dollar value of assessments and mining-related fatalities. Additionally, the FCA would repeal the requirement that public companies disclose (a) if they source "conflict minerals" from the Democratic Republic of Congo and its nine neighboring countries under Section 1502 of the Dodd-Frank Act or (b) payments made to governments, including companies owned by a foreign government, made for the purpose of the commercial development of oil, natural gas or minerals under Section 1504 of the Dodd-Frank Act.

The FCA has been sent to the U.S. Senate Committee on Banking, Housing and Urban Affairs (Senate Banking Committee), where Senate Banking Committee Chairman Michael Crapo, R-Idaho, will work with U.S. Senate leadership and other members of the Senate Banking Committee to decide when the best time will be to schedule a public hearing on the measure. You can check for updates on the Senate Banking Committee website at https://www.banking.senate.gov.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement

    Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of www.mondaq.com

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at enquiries@mondaq.com.

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions