House Panel OKs SEC Forum, Risk Retention Bills

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By Rob Tricchinelli

March 2 — The House Financial Services Committee approved a lineup of securities bills March 2 dealing with the SEC’s in-house forum, Dodd-Frank risk retention rules, venture exchanges, emerging growth company audit requirements, the Volcker Rule and startup capital.

One bill, H.R. 3798, would allow Securities and Exchange Commission respondents to move many enforcement actions into federal court and would increase the burden of proof for the SEC in cases that stay in-house.

That bill would “protect the vital due process rights of defendants in proceedings before the Securities and Exchange Commission,” Committee Chairman Jeb Hensarling (R-Texas) said.

Another would allow the agency to approve “venture exchanges” for trading with fewer regulations in companies with a market capitalization of less than $1 billion. Both bills were sponsored by Rep. Scott Garrett (R-N.J.).


The in-house court bill sparked debate among committee members, who echoed some of the same arguments raised by administrative respondents challenging the constitutionality and fairness of the forum.

In a March 2 letter to members of Congress, a coalition of public interest groups, including Americans for Financial Reform and Public Citizen, called it “astoundingly hypocritical” to open federal court to accused companies when those companies often contract with their customers to avoid federal courts in case of disputes.

The bill was approved 32-25, along party lines.

The venture exchanges bill, H.R. 4638, was approved 32-25, also along party lines.

Risk Retention

The committee also approved legislation to pare back Dodd-Frank Act risk retention rules as they affect commercial real-estate loans and collateralized loan obligations.

The rules, jointly adopted by federal financial regulators in October 2014, require sponsors of securitizations to retain some of the risk in the instruments .

H.R. 4166 was introduced by Rep. Andy Barr (R-Ky.). Under that bill, leverage restrictions would be sharply reduced for CLOs, but some qualified CLOs would be still be subject to credit risk retention rules. It was approved 42-15.

The other bill, introduced by Rep. French Hill (R-Ark.), would exempt commercial real estate loans and some securitizations of those loans from the rules.

That bill, H.R. 4620, would “essentially exempt most securitizations of corporate loans from risk retention,” Committee Ranking Member Maxine Waters (D-Calif.) said. It “would diminish underwriting standards that we sought to promote in the Dodd-Frank Act.” It was approved 39-18 despite some Democratic objection..

Other Bills

One approved bill would allow issuers to present offerings at certain events without running afoul of the prohibition on general solicitation, provided they don’t give specific information about the offerings.

The sponsors of the events would also be prohibited from negotiating the offerings or giving investment advice.

That bill, H.R. 4498, sponsored by Rep. Steve Chabot (R-Ohio), was approved 44-13.

Rep. Kyrsten Sinema (D-Ariz.) sponsored H.R. 4139, which would affect audit rules.

Sarbanes-Oxley Section 404(b) requires public companies’ auditors to attest to management’s analysis of internal controls. The bill would tack on five more years to the existing exemption for emerging growth companies from those requirements.

“It’s a very small number of companies” affected, Sinema said. It was approved 42-15 with Democratic support.

Another bill would largely undo a Volcker Rule prohibition on related investment advisers and private equity funds having the same name.

H.R. 4096 was sponsored by Rep. Michael Capuano (D-Mass.) and was approved by voice vote.

To contact the reporter on this story: Rob Tricchinelli in Washington at

To contact the editor responsible for this story: Phyllis Diamond at

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