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REGULATION/LEGISLATION

Dodd-Frank replacement bill to be weighed as lawmakers reconvene

A Republican proposal to replace much of the Dodd-Frank Wall Street Reform and Consumer Protection Act will be officially unveiled when Congress returns April 24, followed by a hearing April 26 before the House Financial Services Committee, whose chairman is the chief sponsor, Jeb Hensarling, R-Texas.

A discussion draft of the proposed Financial CHOICE Act covers a wide range of objectives, from reducing regulatory burdens for smaller banks and ending taxpayer-funded bank bailouts to increasing tougher penalties for insider trading and financial fraud. It also would end the Volcker Rule that bans banks from engaging in proprietary trading.

Changes made to similar legislation introduced in the last Congress include increasing some penalties imposed by the Securities and Exchange Commission; creating an SEC enforcement advisory committee; creating an exemptive relief process for developing new products such as exchange-traded funds; stress testing reforms; and tighter standards for shareholder proposals. The CHOICE Act, which stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs, would increase the burden of proof needed to bring claims of fiduciary duty breaches. It would also delay the Department of Labor's new fiduciary rule by mandating that it be “substantially similar” to an SEC fiduciary standard, which has not been proposed yet.