May 4, 2017

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FSR: CHOICE Act Committee Passage Important First Step to Improving Regulatory System and Promoting Economic Growth

We thank the Committee for its leadership in driving the regulatory reform debate forward and look forward to working with policymakers to craft a regulatory reform system that unlocks more economic opportunity for all Americans.

FSR: CHOICE Act Committee Passage Important First Step to Improving Regulatory System and Promoting Economic Growth
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U.S. Representative (TX-5) Jeb Hensarling, Chairman of the House Financial Services Committee

FSR: CHOICE Act Committee Passage Important First Step to Improving Regulatory System and Promoting Economic Growth


WASHINGTON, D.C. – The Financial Services Roundtable (FSR) today called passage of the CHOICE Act by the House Financial Services Committee an important first step to improving the regulatory system and promoting economic growth. FSR signaled its support for many of the provisions in the Act.

“Improvements to financial regulations can lead to economic growth, while still protecting taxpayers and consumers,” said FSR CEO Tim Pawlenty. “We thank the Committee for its leadership in driving the regulatory reform debate forward and look forward to working with policymakers to craft a regulatory reform system that unlocks more economic opportunity for all Americans.”

Earlier this week, FSR also sent a letter to the Committee outlining its support for many provisions of the Act.

Price Controls

FSR members strongly support the repeal of the government-imposed price controls related to the Dodd-Frank Act’s “Durbin Amendment,” which caps interchange fees for debit card transactions. This price control amounts to a government-directed resource transfer from one private sector – banking – to another private sector – merchants. This distortion of the free market has had substantial downside effects on consumers. The Durbin Amendment resulted in no discernable effect on merchant prices, while certain banking products and services, such as free checking and debit rewards, have ended or been reduced as a result.

Financial Stability Oversight Council Designation Authority

FSR supports the CHOICE Act’s aim to de-designate non-bank SIFIs and remove FSOC’s power to make such designations. FSOC’s designation of nonbank financial companies has failed to reduce systemic risk while at the same time subjecting certain firms to duplicative, and in some cases, massive new regulatory burdens. Despite having several years to produce robust analysis, FSR believes that the FSOC has failed to show how insurers, asset managers, and other non-banks pose a material systemic risk or why they should be regulated under bank-centric regulatory standards.

Improving Enhanced Prudential Standards

FSR supports the CHOICE Act’s improvement to the Dodd-Frank Act’s Section 165 enhanced prudential standards. FSR believes a regulatory system should be tailored to reflect the
unique business operations, risk and capital profile of diverse financial services providers and that targeted regulatory approaches should not be based on arbitrary thresholds, but rather holistic measures of enterprise risk.

Transparency & Administrative Actions

FFSR supports the legislation’s provisions requiring more transparency and accountability from federal regulatory agencies. Agencies understandably focus their missions to faithfully execute laws passed by Congress but transparency, balance and accountability could be improved if structural reforms were enacted. Financial regulatory agencies would better serve the public interest with multi-member, bipartisan commission structures and more weight being placed on cost-benefit analysis for new rulemakings. These measures would facilitate important debate and improved regulation. In addition, FSR supports proposals subjecting each financial services regulator to annual Congressional appropriations to enhance oversight.

Fiduciary Standards of Customer Care

FSR strongly supports applying a best interest standard to all persons providing personalized investment advice and guidance to all retail investors, not just for advice related
employee benefit plans, individual retirement accounts (“IRAs”) and other entities treated as plans for purposes of the Code (“Retirement Investors”). For the sake of clarity and
transparency, the regulation and oversight of investment advisers, broker-dealers and others engaged in providing personalized investment advice about securities to retail investors should be the primary responsibility of the Securities and Exchange Commission (the “SEC”). The SEC has the expertise, knowledge and authority to most effectively and efficiently coordinate the myriad of applicable laws and regulations pertaining to such investment activities. State insurance authorities should take the lead on the regulation of annuities and insurance products, including life insurance companies and their agents or distributors.

Small and Medium-size Business Lending

FSR supports the CHOICE Act’s effort to enhance the ability of Business Development Companies (BDCs) to help meet the capital needs of small and mid-sized businesses. BDCs
are a specialized investment companies that focus on supporting the capital needs of small and mid-sized businesses. The legislation increases the allowable investment capacity of BDCs and the types of companies that qualify for BDC investments. These are important improvements that will help business across the country invest in products, people, and their future.

Volcker Rule

The original intent of the Volcker Rule was to limit threats to the safety and soundness of large bank holding companies resulting from excessive risk taking in certain trading and fund activities. The regulation implementing the Rule goes beyond this intent. It is overly broad and restricts client-oriented activities that do not pose a material risk to the safety and soundness of institutions subject to the Rule, nor the financial system. FSR urges reforms to refine the Volcker Rule. Such changes should: (1) Better tailor the Rule; (2) Narrow the definition of a covered fund; (3) Clarify the definition of prohibited proprietary trading; (4) Simplify compliance; (5) Conform the Rule’s territorial reach with traditional standards of national treatment; (6) Designate the Federal Reserve as the lead agency responsible for writing and interpreting the Rule; (7) Not favor any particular business model or impact institutions without significant trading activities; and (8) Repeal the Rule’s “naming prohibition.”


FSR looks forward to working with the Committee and policymakers to refine aspects of the CHOICE Act, including the bill’s capital leverage ratio requirements, as it moves through Congress.

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About The Author

The Financial Services Roundtable represents the largest integrated financial services companies providing banking, insurance, payment and investment products and services to the American consumer. Member companies participate through the Chief Executive Officer and other senior executives nominated by the CEO. FSR member companies provide fuel for America’s economic engine, accounting for $92.7 trillion in managed assets, $1.2 trillion in revenue, and 2.3 million jobs.

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