Legislative Activity

Senate to Consider “Audit the Fed” Legislation as House Takes Up Another Bill on Terrorism Financing

This week, Congress is set to take up two financial services bills. First, on Tuesday, January 12, following continued concern regarding the need for improved congressional oversight of the Federal Reserve, the Senate will take up S. 2232, Audit the Fed, which was introduced by Senator Rand Paul (R-KY). Specifically, the legislation directs the Government Accountability Office (GAO) to: (1) commence and complete an audit of the Board of Governors of the Federal Reserve System and of the Federal Reserve Banks within 12 months of enactment of this Act; and (2) report findings and conclusions to Congress within 90 days of completing the audit. The bill also repeals certain limitations upon such an audit. Moreover, though this bill may not be the ultimate vehicle, many lawmakers – including Representative Randy Neugebauer (R-TX), who is in part leading the charge – are seeking a way to ease the impact on banks resulting from a provision in last year’s highway bill that cut the dividends paid on the Federal Reserve Bank stock.

On the House side, lawmakers on Wednesday, January 13, will consider H.R. 3662, Iran Terror Finance Transparency Act. The bill would prohibit the Obama Administration from removing Iranian individuals and entities from the list maintained by the Office of Foreign Asset Control of the Department of the Treasury unless the Administration can certify the entity is not a terror financier, human rights abuser, or involved in the proliferation of weapons of mass destruction. The bill also provides Congress with enhanced oversight, requiring quarterly reports including, but not limited to, the number of licenses applied for and approved, as well as the types of transactions the license pertained to.

Hensarling Has “Vision for Financial Reform” in 2016; Shelby Remains Silent After Failing to Achieve Regulatory Reform

As lawmakers wrapped up the first session of the 114th Congress without passing a broad financial services regulatory overhaul, House Financial Services Chairman Jeb Hensarling (R-TX) emphasized that we “will see a see a visionary piece of legislation laying out the Republican vision for financial reform…[a]nd part of that will necessarily include repealing huge swaths of Dodd-Frank that have been hurting consumer choice and holding back economic growth.” Though no specific timeline has been set, Chairman Hensarling has indicated that the legislation – which will likely focus on “too-big-to-fail” and reforming the systemically important financial institution (SIFI) regime – is unlikely to be introduced before the Spring.

On the Senate side, there continues to be little action coming out of the Senate Banking Committee. With his Committee’s inability to successfully agree on broad financial services regulatory reform last year, Chairman Shelby has not given any indication what is to come from his Committee this year. Nevertheless, at a minimum, it is expected that Chairman Shelby will face pressure to move forward with the confirmation of various Obama financial services nominees – including nominations to fill the vacancies of two Securities and Exchange Commission (SEC) Commissioners.

With No Proposal to Derail DOL ’s Fiduciary Rule Included in the Omnibus, Lawmakers Float Additional Legislative Proposals

With the Department of Labor’s (DOL) Fiduciary Rule still expected to be finalized during the first half of this year – and without a provision to derail the regulation included in last year’s Omnibus – lawmakers at the end of 2015 released proposals (Strengthening Access to Valuable Education and Retirement Support (SAVERS) Act and Affordable Retirement Advice Protection (ARAP) Act) to “ensure retirement advisors serve their clients’ best interests and preserve access to quality financial planning.” According to the bipartisan group of lawmakers who are spearheading the proposals – including Representatives Peter Roskam (R-IL), Richard Neal (D-MA), Phil Roe (R-TN), and John Larson (D-CT) – the bills were designed to “reflect a set of bipartisan principles members introduced in response to a Department of Labor regulatory proposal that many fear will reduce access to financial advice for low- and middle-income families.”

This Week’s Hearings:

• Tuesday, January 12: The House Financial Services Subcommittee on Housing and Insurance will hold a hearing to discuss opportunities and challenges facing the National Flood Insurance Program.

• Wednesday, January 13: The House Financial Services Subcommittee on Housing and Insurance will hold a hearing on how to create a more robust and private flood insurance marketplace.

Regulatory Activity

SEC to Move Forward with Several Regulations

Despite language in last year’s Omnibus that prohibited the SEC from using FY 2016 funds to finalize a rule requiring companies to disclose their political campaign contributions, Senate Democrats are urging the Commission to move forward anyway, noting that “the SEC retains the authority to take important steps to prepare for a rulemaking on this issue.” The SEC is also under pressure to finalize several rules required by last year’s highway bill, including revising Form S-1 by January 19; the Commission is also required to overhaul what companies are required to disclose in their financial statements.

Separately, the SEC is expected to move forward with other priorities this year, including regulations related to: (1) the definition of an “accredited investor”; (2) investment fund reforms ; and (3) a uniform fiduciary rule for brokers and advisers.