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Legislative Updates: April 2015


Capitol Call

March was a busy month in Washington, D.C. Congress was in session for six consecutive weeks, so there was a lot of pressure to get important legislative priorities approved. Big ticket items included the House and Senate approving separate versions of the Fiscal Year 2016 federal budget, replacing the Sustainable Growth Rate (SGR) formula for physicians under Medicare, and debating the pros and cons of a nuclear agreement with Iran.

In the area of financial services, the House Financial Services Committee (HFSC) and the Senate Banking Committee (SBC) were busy conducting hearings related to the SEC. On March 24, the HFSC held a hearing on the SEC's Fiscal Year 2016 budget request, with SEC Chair Mary Jo White as the only witness. Chairperson White testified and answered committee questions regarding the SEC fiduciary duty rule for broker-dealers, the pending SEC rules pursuant to the "crowdfunding" title of the Jumpstart Our Business Startups (JOBS) Act, the Volcker Rule, and the Financial Stability Oversight Council's (FSOC) recent determinations regarding several nonbank financial companies as systemically important financial institutions.

On March 19, the House Subcommittee on Capital Markets and Government Sponsored Enterprises of the HFSC held an oversight hearing on the SEC's Division of Enforcement. Andrew J. Ceresney, Director of the Division of Enforcement mentioned in his written testimony that the SEC brought the highest number of enforcement actions to date, currently 755, and obtained fines totaling over $4.16 billion. He also emphasized that the SEC will continue to take advantage of its improved information processing and analytic capabilities in its efforts to identify, punish, and deter misconduct.

The Senate Banking Committee's Subcommittee on Securities, Insurance and Investment held an oversight hearing on venture exchanges and small-cap companies. Previously, the SEC's Advisory Committee on Small and Emerging Companies recommended to the SEC the creation of a separate U.S. equity market that would facilitate trading in the securities of small and emerging companies. Witnesses who testified at the hearing were divided about whether venture exchanges could facilitate this goal or whether further amendments to the JOBS Act would increase the trading of smaller company stocks. It is unclear whether this hearing will result in legislation.

March also saw activity in the House Agriculture Committee, where Commodity Exchanges, Energy and Credit Subcommittee Chairman Austin Scott (R-GA) held a hearing related to the reauthorization of the CFTC. In his opening statement, Chairman Scott mentioned that derivatives markets have changed in the five years since the passage of Dodd-Frank, both because of and in response to the new rules written by the Commission. Chairman Scott also stated that, "My goal throughout this process is to ensure that we have a healthy balance between market integrity and market access. Derivative markets exist for those who have risks to hedge. Hedgers need markets that are safe, but they also need markets with affordable execution, available counterparties, and consistent liquidity. This subcommittee will continue to look for that healthy balance." A draft legislative proposal to reauthorize the CFTC is expected soon.

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