Legislative Activity

Lawmakers Still Divided on Labor’s Fiduciary Rule

With the Department of Labor’s (DOL) Fiduciary Rule now with the Office of Management and Budget and being prepared for release in final form later this spring, last week Speaker of the House Paul Ryan (R-WI) emphasized his opposition to the proposal, noting that he is “determined to do everything possible” to derail the rule. Sharing the concerns of many other Republican lawmakers, Speaker Ryan underscored that the proposal would likely increase compliance burdens, raise the cost of investment advice, and potentially limit consumers’ access to such advice. Still, following a meeting last week with Secretary of Labor Thomas Perez, many Democrats who previously expressed reservations about the rule appear to have had their concerns resolved and are ready to support the proposal.

As previously reported, lawmakers in both the House and Senate have introduced legislation to block the Fiduciary Rule and replace it with a congressionally-drafted fiduciary standard by amending the Internal Revenue Code and the Employee Retirement Income Security Act (ERISA). The House Ways and Means Committee and the House Education and the Workforce Committee have both marked-up their respective Fiduciary Rule legislation, while the Senate versions of the bills have not yet been taken up by their respective committees.

Relatedly, last week, Securities and Exchange Commission (SEC) Chair Mary Jo White indicated that, despite the fact that the SEC only has three Commissioners, the Commission remains committed to moving forward with its efforts to promulgate a uniform Fiduciary Rule for investment advisors and broker dealers. The timing of such a proposal, however, remains unclear. Interestingly, the SEC’s renewed commitment to its own version of the rule comes as the Senate Homeland Security and Governmental Affairs Committee last Wednesday released a nearly 40-page report that suggests DOL rejected many of the SEC’s recommendations; DOL, however, responded that this was a mischaracterization and that its “engagement with the SEC was comprehensive.”

Puerto Rico Solution Remains Priority as March Deadline Approaches

As March approaches, pressure will remain on lawmakers to address the fiscal crisis in Puerto Rico. Last week, both the House Natural Resources Committee and House Financial Services Committee held hearings to discuss the appropriate path forward. While all agreed that Congress must take action to address the Commonwealth’s situation, there remained a clear divide between Republicans – who expressed skepticism over allowing Puerto Rico to access Chapter 9 bankruptcy protections – and Democrats – who generally, including the Obama Administration, appeared more amenable to allowing the island to restructure its debts. Though the exact approach and scope of the yet-to-be-released legislation are still being worked out, House Republicans are moving forward with a sense of urgency, as Speaker Ryan has asked that a solution be reached by the end of March.

Financial Services Policymakers Focus on International Insurance Regulation

Last week, the House Financial Services Subcommittee on House and Insurance held a hearing to discuss international insurance regulation and the impact on U.S. insurers. During the hearing, lawmakers discussed best practices for coordinating domestic and international insurance regulations on the insurance industry. There was also discussion of draft legislation addressing congressional oversight of international insurance regulation deliberations. Specifically, the draft legislation would establish various requirements before the Federal Insurance Office (FIO) or the Federal Reserve are permitted to agree to, accept, establish, enter into, or consent to the adoption of any final international insurance standards. This renewed oversight of international insurance standards comes after U.S. and EU regulators met from February 18-19 to discuss insurance regulation.

This Week’s Hearings:

  • Tuesday, March 1: The House Financial Services Committee Task Force to Investigate Terrorism Financing will hold a hearing titled “Helping the Developing World Fight Terror Finance.”
  • Tuesday, March 1: The House Appropriations Subcommittee on Transportation, Housing, and Urban Development will hold a hearing to discuss the budget of the Department of Housing and Urban Development.
  • Wednesday, March 2: The House Financial Services Committee will hold a markup of bills designed to promote access to capital and reduce regulatory burdens, as well as legislation on flood insurance options.
  • Thursday, March 3: The Senate Banking Committee will hold a hearing titled “Regulatory Reforms to Improve Equity Market Structure.”

Regulatory Activity

CFTC Likely to Move Forward on Position Limits, to Hold Roundtable on Residual Interest Deadline

Last week, the Commodity Futures Trading Commission’s (CFTC) Energy and Environmental Markets Advisory Committee held a meeting and released a report suggesting that there is “little to no evidence” that the Commission’s position limits rule is necessary. Nevertheless, CFTC Chairman Timothy Massad, as well as various Senators, including Elizabeth Warren (D-MA), Sherrod Brown (D-OH), and Bernie Sanders (I-VT) have come out in strong support of moving forward with the rule, despite the concerns of the CFTC’s Advisory Committee.

Additionally, on Thursday, March 3, the CFTC’s Division of Swap Dealer and Intermediary Oversight and the Office of the Chief Economist will host a public roundtable to discuss a report on the Residual Interest Deadline. The CFTC amended Regulation 1.22 regarding the requirement that a futures commission merchant maintain sufficient of its own capital in customer segregated accounts to cover the undermargined amount in futures customers’ trading accounts as of the close of trading on the previous business day. By May 16, 2016, staff must complete and publish for publish for public comment a report addressing the practicability of amending the Residual Interest Deadline from 6:00pm EST to the time of the settlement or some other time of day. This roundtable will, as required by Regulation 1.22, facilitate discussion of specific issues to be covered by the report.

FSOC to Discuss Annual Report, Federal Reserve to Meet on Single-Counterparty Credit Limits

On Wednesday, March 2, the Financial Stability Oversight Council (FSOC) will meet in Executive Session to discuss: (1) market developments; (2) the Council’s Annual Report; (3) the annual reevaluation of the designation of a nonbank financial company; and (4) an update on the Council’s ongoing work on asset management.

Additionally, on Friday, March 4, the Board of Governors of the Federal Reserve will hold a meeting to consider a proposal to establish single-counterparty credit limits for large U.S. bank holding companies and foreign bank organizations.