The Financial Services Committee, on Oct. 12, approved a package of 22, largely bipartisan bills  intended to aid banks, credit unions, and emerging growth companies.Among numerous other matters, the bills affect data collection by the Securities and Exchange Commission, examination oversight by the Consumer Financial Protection Bureau, and the threshold for determining that a financial institution is systemically important.

A summary of the bills follows.

H.R. 3072, Bureau of Consumer Financial Protection Examination and Reporting Threshold Act of 2017

It amends the Consumer Financial Protection Act of 2010 to raise the examination threshold that brings an insured depository institution or insured credit union under supervision by the CFPB from assets of $10 billion or more to assets of $50 billion or more. The bill also increases from $10 billion to $50 billion the threshold at which an insured depository institution or insured credit union is subject to CFPB reporting requirements.

The bill was approved 39-21.

H.R. 3973, Market Data Protection Act of 2017

It amends the Securities Exchange Act of 1934 to require that the SEC, FINRA, and the operator of the Consolidated Audit Trail (CAT), in consultation with the SEC’s Chief Economist, develop comprehensive internal risk control mechanisms to safeguard and govern the storage of market data, all market data sharing agreements, and all academic research using market data. The bill also halts market data reporting to the CAT until the operator of the CAT develops such internal risk control mechanisms.

The bill was approved 59-1.

H.R. 1645, Fostering Innovation Act

It amends Section 404(b) of the Sarbanes-Oxley Act (SOX) to extend the exemption to comply with the law for emerging growth companies (EGCs) that would otherwise lose their exempt status at the end of the five-year period that applies under current law. The bill extends the exemption until the earlier of ten years after the EGC went public, the end of the fiscal year in which the EGC’s average gross revenues exceed $50 million, or when the EGC qualifies with the SEC as a large accelerated filer ($700 million public float, which is the number of shares that are able to trade freely between investors that are not controlled by corporate officers or promoters).

The bill was approved 46-14.

H.R. 3312, Systemic Risk Designation Improvement Act

It amends the Dodd-Frank Wall Street Reform and Consumer Protection Act to remove the arbitrary $50 billion asset threshold used to designate firms as “systemically important financial institutions” and subject them to enhanced regulatory standards. The bill also authorize the Financial Stability Oversight Council (FSOC) to subject a bank holding company to enhanced supervision and prudential standards by the Board of Governors of the Federal Reserve System (the Federal Reserve), if an institution has been identified as global systemically important bank (G-SIB) under the indicator-based measurement approach established under section 217.402 of title 12, Code of Federal Regulations. This measurement is based on a particular institution’s “systemic indicator scores,” which reflects size, interconnectedness, cross-jurisdictional activity, substitutability, and complexity relative to the other U.S. and foreign banking organizations identified by the Basel Committee on Banking Supervision and any other banking organization included in the Basel Committee’s sample for a given year.

This bill also substitutes G-SIB status in place of the current monetary threshold as the determinant for the Federal Reserve’s authority over bank holding company acquisition restrictions, prohibitions on interlocks between management of different financial companies, and enhanced supervision and prudential standards.

The bill was approved 47-12.

H.R. 477, Small Business Mergers, Acquisitions, Sales, and Brokerage Simplification Act

It amends Section 15(b) of the Securities Exchange Act of 1934 to exempt from registration mergers and acquisitions (M&A) brokers performing services in connection with the transfer of ownership of smaller privately held companies with gross revenues of less than $250,000,000. This bill also outlines exclusions and disqualifications from this exemption for broker dealers.

The bill was approved 37-23.

H.R. 1116, the “Taking Account of Institutions with Low Operation Risk Act

It directs the federal financial institutions regulatory agencies to tailor their rulemakings in consideration of the risk profiles and business models of institutions that are subject to such rules. The bill also directs such agencies to annually report to Congress and testify regarding the specific actions taken to tailor their regulatory actions.

The bill was approved 39-21.

H.R. 1585, Fair Investment Opportunities for Professional Experts Act

The “Fair Investment Opportunities for Professional Experts Act,” as modified by an amendment in the nature of a substitute, amends the Securities Act of 1933 to modify the definition of accredited investor to include: (1) persons whose individual net worth, including their spouse’s, exceeds $1,000,000, excluding the value of their primary residence; (2) persons with an individual income greater than $200,000, or joint income with one’s spouse greater than $300,000; (3) persons with a current securities-related license; and (4) persons whom the U.S. Securities and Exchange Commission (SEC) determines have demonstrable education or job experience to qualify as having professional subject-matter knowledge related to a particular investment.

The bill was approved 58-2.

H.R. 1699, Preserving Access to Manufactured Housing Act

It amends the Truth in Lending Act (TILA) to modify the definitions of a mortgage originator and a high-cost mortgage, to provide technical clarifications to the definition of a “mortgage originator” for purposes of TILA. The bill also amends the definition of a high-cost mortgage and corresponding thresholds to ensure that consumers of small-balance mortgage loans will have the opportunity to have access to mortgage credit.

The bill was approved 42-18.

H.R. 3857, the Protecting Advice for Small Savers (PASS) Act of 2017

It repeals the final rule of the Department of Labor (DOL) titled “Definition of the Term ‘Fiduciary’ Conflict of Interest Rule--Retirement Investment Advice” and related prohibited transaction exemptions published by the DOL on April 8, 2016. The bill also establishes important investor protections by amending the second subsection (k) of Section 15 of the Securities Exchange Act of 1934 to require a broker-dealer to act in the retail customer’s best interest when providing a recommendation. Such a recommendation must reflect (i) reasonable diligence and (ii) the reasonable care, skill, and prudence that a broker-dealer would exercise based on the customer’s investment profile. The bill further requires a broker-dealer to provide increased disclosures to the customer before the broker-dealer may purchase a securities product on behalf of that customer, including disclosures regarding the type and scope of services the broker-dealer provides, the standard of conduct that applies to the relationship, the types of compensation the broker-dealer receives, and any material conflict of interest.

The bill was approved 34-26.

H.R. 2121, Pension, Endowment, and Mutual Fund Access to Banking Act

It specifies that a custodial bank shall exclude central bank placements from the calculations to determine the applicable supplementary leverage ratio.

The bill was approved 60-0.

H.R. 2148, Clarifying Commercial Real Estate Loans

It provides clarity to capital requirements for certain acquisition, development, or construction loans by permitting the appraised value of real property to count toward a 15 percent equity threshold in order to be exempted from a High Volatility Commercial Real Estate (HVCRE) designation as otherwise required under Basel III. The bill also provides an off-ramp from HVCRE designation when a loan matures and qualifies for underwriting standards for permanent financing. The bill also exempts loans made prior to Jan. 1, 2015, when the Basel III rule took effect.

The bill was approved 59-1.

H.R. 2201, Micro Offering Safe Harbor Act

It amends the Securities Act of 1933 to exempt certain micro-offerings from the Securities Act’s registration requirements. Small businesses would not violate the Act when making a non-public securities offering if all of the following requirements are met: (1) each purchaser has a substantive pre-existing relationship with an officer, director, or shareholder with 10 percent or more of the shares of the issuer; (2) the issuer reasonably believes that there are no more than 35 purchasers of securities from the issuer that are sold in reliance on the exemption during the 12-month period preceding the transaction; and (3) the aggregate amount of all securities sold by the issuer does not exceed $500,000 over a 12-month period. The bill also prohibits a bad-actor from participating in a micro-offering.

The bill was approved 34-26.

H.R. 2396, Privacy Notification Technical Clarification Act

It amends the Gramm-Leach-Bliley Act to reduce confusion among consumers that can occur when they receive annual privacy notices, by clarifying that financial institutions are not required to provide an annual privacy notice disclosure so long as the institution makes its current policy available to consumers online or at the consumer’s request, and the institution conspicuously notifies consumers of the available policy.

The bill was approved 40-20.

H.R. 3948, Protection of Source Code Act

It amends the Securities Act of 1933 to require the SEC to first issue a subpoena before compelling a person to produce or furnish to the SEC algorithmic trading source code or similar intellectual property.

The bill was approved 46-14.

H.R. 2706, Financial Institution Customer Protection Act

The bill prohibits a federal banking agency from directing a depository institution to terminate an account, absent a material reason. As modified by an amendment in the nature of a substitute, the bill requires a federal banking agency to provide a depository institution written justification of any request to terminate or restrict a customer account, except in instances of national security. The bill also requires the federal banking agencies to issue an annual report to Congress that describes the number of customer accounts the agency requested or caused to be closed and the legal authority on which the agency relied.

The bill was approved 59-1.

H.R. 2954, Home Mortgage Disclosure Adjustment Act

It amends the Home Mortgage Disclosure Act of 1975 to exempt from maintenance of mortgage loan records and disclosure requirements depository institutions that have originated in each of the two preceding calendar years, fewer than 500 closed-end mortgage loans, and fewer than 500 open-end lines of credit.

The bill was approved 36-24.

H.R. 3758, Senior Safe Act of 2017

It provides that: (1) a supervisor, compliance officer, or legal advisor for a covered financial institution who has received training regarding the identification and reporting of the suspected exploitation of a senior citizen (at least 65 years old) shall not be liable for disclosing such exploitation to a covered agency if the individual made the disclosure in good faith and with reasonable care; and (2) a covered financial institution shall not be liable for such a disclosure by such an individual if the individual was employed by the institution at the time of the disclosure and the institution had provided such training.

The bill was approved 60-0.

H.R. 3898, Impeding North Korea’s Access to Finance Act of 2017

It would impose secondary financial sanctions with respect to the Democratic Republic of North Korea. The legislation would also incentivize stricter sanctions enforcement by foreign countries, and require regular reports on sanctions implementation from the Department of the Treasury. This legislation includes Presidential waiver authorities that provide for sanctions relief if North Korea takes meaningful steps to limit its development and proliferation of weapons of mass destruction.

The bill was approved 56-0.

H.R. 3903, Encouraging Public Offerings Act

The bill amends the Securities Act of 1933 to expand to all public companies certain provisions of Title I of the JOBS Act, which previously applied only to an EGC. Specifically, the legislation allows issuers to submit to the SEC for confidential review, before publicly filing, draft registration statements for Initial Public Offerings (IPOs) and for follow-on offerings within one year of an IPO. Additionally, this bill allows all companies to “test-the-waters” before filing an IPO, which means they may meet with qualified institutional buyers (QIBs) and other institutional accredited investors to gauge those investors’ interest in the offering.

The bill was approved 60-0.

H.R. 3911, Risk-Based Credit Examinations Act of 2017

The bill amends the Securities Exchange Act of 1934 to allow the SEC to perform risk-based examinations of the Nationally Recognized Statistical Rating Organizations (NRSROs).

The bill was approved 60-0.

H.R. 3971, Community Institution Mortgage Relief Act

It amends the Truth in Lending Act to direct the Consumer Financial Protection Bureau (CFPB) to exempt from certain escrow or impound requirements a loan secured by a first lien on a consumer's principal dwelling if the loan is held by a creditor with assets of $25 billion or less. The CFPB must also provide either exemptions to, or adjustments from, the mortgage loan servicing and escrow account administration requirements of the Real Estate Settlement Procedures Act of 1974 for servicers of 30,000 or fewer mortgage loans.

The bill was approved 41-19.

H.R. 3972, Family Office Technical Correction Act of 2017

The bill clarifies that family offices and family clients, as defined in section 275.202(a)(11)(G)-1 of title 17, Code of Federal Regulations, are accredited investors under Regulation D of the Securities and Exchange Commission.

The bill was approved 60-0.

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