The Bad CHOICE Act
I’m testifying before House Financial Services tomorrow regarding the “CHOICE Act,” the Republican Dodd-Frank alternative. My testimony is here. It’s lengthy, but it doesn’t even cover everything in the CHOICE Act–there are just too many bad provisions, starting with the idea of letting megabanks out of Dodd-Frank’s heightened prudential standards in exchange for more capital, then moving on to a total gutting of consumer financial protection, and ending with a very poorly conceived good bank/bad bank resolution system executed through a new bankruptcy subchapter. The only good thing about the Bad CHOICE Act is that it has little chance of becoming law any time soon.
Excerpt: “The CHOICE Act also has numerous provisions that make it difficult for the SEC to pursue enforcement actions and achieve meaningful relief. These provisions reduce the SEC’s deterrence ability and thereby embolden financial fraudsters whose malfeasance can reverberate throughout the financial system. Among other provisions, the CHOICE Act:
- requires the SEC to make additional findings before levying civil monetary penalties against issuers.24 Thus, while the CHOICE Act increases financial fraud penalties with the one hand,25 with the other it ensures that those penalties will rarely be imposed.
- repeals the SEC’s authority to issue officer and director bans.26 This means that even the worst fraudsters will continue to be able to participate in securities markets.
- eliminates automatic bad actor disqualification from securities law exemptions even for firms that have been convicted of felonies. Apparently a convicted felon cannot be trusted with the right to vote, but can be trusted with pension funds and retirees’ savings. [CHOICE Act § 419]”