The House of Representatives recently passed, by a vote of 271-154, legislation that includes a delay in the implementation of the Volcker Rule until 2019. The proposed change would add two years to the maximum extension period allowed under Dodd-Frank for the Federal Reserve to implement the rule. As discussed previously here, the Federal Reserve recently indicated its intention to grant a third and final extension next year until July 21, 2017. The measure is likely destined for a presidential veto, however, if it wins Senate passage; in his State of the Union address last night, President Obama vowed to oppose any legislation that would “[unravel] the new rules on Wall Street.”

The measure was first brought to the House floor on January 7, on the second day of the 114th Congress, under a fast-track procedure typically reserved for noncontroversial bills that requires a two-thirds majority for passage. House Democrats prevented it from achieving the two-thirds majority. A week later, the bill came to the House floor under a procedure requiring only a simple majority.

Known as the Promoting Job Creation and Reducing Small Business Burdens Act, the legislation is substantially identical to a bill that passed the House last September by a vote of 320-102, and many of its 11 component bills passed the House individually with overwhelming bipartisan support in the 113th Congress. Some parts, unlike the Volcker extension, are relatively uncontroversial, such as provisions allowing the Securities and Exchange Commission to establish a pilot program allowing certain companies to increase the minimum price variation their securities can be quoted.

Those opposing the bill have focused on the Volcker extension and have argued that a delay allows another two years to go by without regulation of collateralized loan obligations (CLOs), which the opponents believe are a risky form of financing that could lead to another financial collapse. In contrast, proponents argue that CLOs are an important way for small and big businesses alike to obtain financing during a sluggish economic recovery.

Twenty-nine House Democrats supported the bill, bucking the White House and progressive leaders including Senator Elizabeth Warren (D-MA) and House Minority Leader Nancy Pelosi (D-CA), who were working to keep Democrats unified in opposing the bill.

Describing the legislative package, House Financial Services Committee Chairman Jeb Hensarling (R-TX) said, “The bills that are rolled up to ensure greater capital formation and regulatory relief for our smaller business enterprises, all of these passed either the committee or the House with overwhelming bipartisan support. And now the minority is coming to this floor and somehow crying foul.”

The 11 component bills are detailed below:

  • The Business Risk Mitigation and Price Stabilization Act (formerly H.R. 634) clarifies congressional intent not to impose Dodd-Frank’s margin and capital requirements upon manufacturers, ranchers, and small companies that buy and sell derivatives to hedge against business risk.
  • Legislation sponsored by Representative Gwen Moore (D-WI) (formerly H.R. 5471) clarifies Dodd-Frank’s treatment of affiliates of non-financial firms that use a central treasury unit (CTU) as a risk-reducing best practice to centralize and net the hedging needs of affiliates.
  • The Holding Company Registration Threshold Equalization Act (formerly H.R. 801), introduced by Representatives Steve Womack (R-AR), James Himes (D-CT), and Ann Wagner (R-MO), amends Title VI of the JOBS Act to extend to savings and loan holding companies the same increased shareholder registration threshold with the SEC (from 500 to 2,000) and deregistration threshold (from 300 to 1,200) as it applies to banks and bank holding companies.
  • Legislation sponsored by Representatives Bill Huizenga (R-MI) and Brian Higgins (D-NY) (formerly H.R. 2274) seeks to streamline regulations to facilitate sales by small business owners of their businesses when they retire and create opportunities for new entrepreneurs to take over small and emerging companies that might otherwise have been shut down.
  • The Swap Data Repository and Clearinghouse Indemnification Act of 2013 (formerly H.R. 742), introduced by Representatives Rick Crawford (R-AR), Sean Patrick Maloney (D-NY), Huizenga, and Moore, eliminates indemnification, data sharing, and confidentiality requirements imposed on foreign regulators by Title VII of Dodd-Frank as a condition of obtaining access to data repositories.
  • The Improving Access to Capital for Emerging Growth Companies Act (formerly H.R. 3623), introduced by Representatives Stephen Fincher (R-TN) and John Delaney (D-MD), reduces SEC registration and disclosure requirements for emerging growth companies (EGCs) to enable them to access the capital markets more efficiently and create jobs.
  • The Small Company Disclosure Simplification Act (formerly H.R. 4164), introduced by Representatives Robert Hurt (R-VA) and Terri Sewell (D-AL), provides a voluntary exemption for all EGCs and other issuers with annual gross revenues under $250 million from the SEC’s requirements to file their financial statements in an interactive data format knows as eXtensible Business Reporting Language.
  • The Restoring Proven Financing for American Employers Act (formerly H.R. 4167), introduced by Representative Andy Barr (R-KY), amends the Bank Holding Company Act to provide banking entities with investments in CLOs issued before January 31, 2014, until July 21, 2019, to be in compliance with the Volcker Rule.
  • The Small Business Investment Companies (SBICs) Advisers Relief Act (formerly H.R. 4200), introduced by Rep. Blaine Luetkemeyer (R-MO), amends the Investment Advisers Act of 1940 to reduce unnecessary regulatory costs and eliminate duplicative regulation of advisers to SBICs.
  • The Disclosure Modernization and Simplification Act (formerly H.R. 4569), introduced by Representative Scott Garrett (R-NJ), directs the SEC to simplify its disclosure regime for issuers by permitting issuers to submit a summary page, which would help investors understand better very lengthy and often densely drafted public company disclosures.
  • The Encouraging Employee Ownership Act of 2014 (formerly H.R. 4571), introduced by Rep. Randy Hultgren (R-IL), modernizes SEC Rule 701 (last updated in 1996) to give private companies more flexibility to reward employees with a company’s securities and thereby retain valuable employees without having to use other compensation methods.

With the new Republican majority in the Senate, passage of the new legislative package is a distinct possibility. Senator Richard Shelby (R-AL), who now chairs the Senate Banking Committee, said he agrees with colleagues in the House that much of Dodd-Frank should be revised, if not repealed outright.

Yet even if the bill is passed by the Senate, there is uncertainty whether both chambers will have enough votes to override an anticipated presidential veto.

Ballard Spahr’s Bank Regulation and Supervision practice includes experienced lawyers who, among other things, follow significant legislative developments and counsel banking clients and their boards of directors and senior management on a variety of regulatory and legislative matters. For more information, please contact Keith R. Fisher at 202.661.2284 or

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