Memo from House Financial Services Committee Hints at a Proposed Sweeping Changes to The Financial Choice Act
Details in a February 2017 memo written by the chair of the U.S. House of Representatives Financial Services Committee illustrate the Trump administration’s interest in sweeping changes and the easing of regulations that govern banks, securities trading, capital investment, corporate reporting, taxpayer bailouts and consumer protection. Even though the memo was not intended for public dissemination, and even though some of the suggested changes to the proposed 2016 Financial Choice Act and its more recent 2017 version may never be enacted into law, West Palm Beach Attorney Laura Anthony, founding partner of Legal and Compliance, LLC, says the new thinking highlighted in the memo represents what could be an “avalanche of positive change for small businesses and capital formation.” As it lays out a 2017 framework for what it calls Financial Choice Act 2.0, the memo recommends changes to the original House-passed U.S. Financial Choice Act, which if passed, would dismantle much of the Securities and Exchange Commission’s (SEC) power and overturn many key provisions in the Dodd-Frank Act, a sweeping law that was adopted in wake of the 2008 recession and banking scandals, Anthony writes in the Securities Law Blog. (The bill passed the House 233-186 on June 8, and now awaits Senate action). Key among the original Financial Choice Act’s provisions were repeal of requirements for companies to report executive compensation, repeal of the federal government’s authority to classify financial institutions as “too big to fail” and cessation of the federal government’s ability to bail out institutions financially, or to investigate risky financial institutions and enforce bail-out provisions. Anthony said the updated 2017 recommendations outlined in the memo have specific implications for federal securities law and capital formation, her areas of legal expertise. Among them: • • •
A threshold increase from $250 million to $500 million for public floats that would be subject to the reporting provisions of the Sarbanes-Oxley Act (SOX). Smaller reporting companies also would be freed of some SOX reporting requirements. Higher registration thresholds, eased registration requirements and an inflation index for smaller companies involved in securities and investments. Greater flexibility around “test-the-waters” communications during initial public offerings, and expanded ability to file IPO registration statements on a confidential basis to all companies, not just to emerging growth companies.
•
General rollbacks of provisions governing self-regulation, allowable offering amounts, the use of universal proxies in contested elections of directors, shareholder ability to submit proposals for vote at annual meetings, and a twoyear delay in the repeal of the Chevron doctrine, which requires courts to defer to an agency’s interpretation of statues and laws.
“Compared to the past 30 years, recent years have seen the most dramatic changes in capital formation regulations and technological development,” Anthony writes in the Securities Law Blog. “My clients are universally enthusiastic about the state of the economy and business prospects as a whole. The consistent mantra of decreased regulation is universally welcomed with a sense of relief.” For more information, or to find out more about the suggested revisions to the U.S. Financial Choice Act, contact attorney Laura Anthony, founding partner of Legal & Compliance, LLC, a national corporate and securities law firm, at 1-800-341-2684 or visit www.LegalandCompliance.com and www.LawCast.com.