08 May 2017
Washington DC
Reporter: Mark Dugdale

Dodd-Frank replacement clears first hurdle


The Financial CHOICE Act, the long awaited legislation that will repeal and replace the Dodd-Frank Act, is set to be considered by the House of Representatives in the coming weeks.

House financial services committee chairman Jeb Hensarling officially introduced the act in April, but a series of Democratic amendments and other delays were raised before the final vote was taken.

Speaking on the act’s journey through Capitol Hill, law firm Arnold & Porter Kaye Scholer noted in a blogpost that “the markup session was a clearly partisan affair that is indicative of the bill's uncertain future in the closely divided Senate”.

The replacement legislation promises to radically re-write several key aspects of Dodd-Frank, and scrap the rest.

Among the first casualties will likely be the Volcker rule, the much-maligned restriction on short-term proprietary trading using banks’ own funds, which “discourages legitimate and needed customer-supporting market-making activities by imposing an overly complex and intent-based compliance regime”, according to Securities Industry and Financial Markets Association executives speaking before a House committee hearing in March.

Deutsche Bank was recently fined $19.7 million for failing to comply with Volcker rule.

The Federal Reserve found gaps in key aspects of Deutsche Bank's compliance programme for the Volcker rule, which generally prohibits insured depository institutions and any affiliated company from engaging in proprietary trading and acquiring or retaining ownership interests in, sponsoring, or having certain relationships, with a hedge fund or private equity fund.

Deutsche Bank was also ordered to improve its senior management oversight and controls over its compliance with Volcker rule requirements.

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