House Financial Services Committee Markup

House Financial Services Committee

Markup of Legislation

Tuesday, March 26 to Thursday, March 28, 2019

Key Topics & Takeaways

• H.R. 1815: Rep. Sean Casten (D-Ill.) introduced his bill and his Amendment in the Nature of a Substitute, which would require the SEC to conduct investor testing., and provides the SEC’s Office of the Investor Advocate with the authority to conduct testing and make the results and data public. Casten said the bill had one intent, which is to ensure disclosures are fair and concise. Speaking in opposition to the bill were Reps. French Hill (R-Ark.), Trey Hollingsworth (R-Ind.), Warren Davidson (R-Ohio), McHenry, Huizenga, Barr and Stivers. Hill commended the intent to provide clear, concise, easy to understand information to investors, but pointed out that the bill as written would “constrain” the SEC from following its core mission and delay regulations, in particular the new investor protections in Reg BI. The amended measure was favorably reported to the House by a vote of 33-26.
• H.R. 1595: Rep. Ed Perlmutter (D-Colo.) introduced his bill and his Amendment in the Nature of a Substitute, which would create a safe harbor for depository institutions to serve cannabis-related businesses that are legal in the states in which they operate, noting the legislation has 151 cosponsors. The amended measure was favorably reported to the House by a vote of 45-15.

Opening Statements

Rep. Maxine Waters (D-Calif.), Chairwoman, House Financial Services Committee

Waters said the committee would focus on fairness and policies to benefit consumers, investors, small businesses, and the economy. She said the legislation being considered takes action to combat foreign corruption, address the homelessness crisis, protect consumers and investors, and ensure legitimate businesses have access to the banking system, noting that many of the bills have bipartisan support. Regarding H.R. 1815, Waters explained that it would require the Securities and Exchange Commission (SEC) “to test any new disclosure intended for retail investors under the SEC’s proposed Regulation Best Interest” and to review and test its existing disclosures for retail investors. Waters said savers deserve advice in their best interest, and to understand the disclosures that are supposed to be in place for their protection. Regarding H.R. 1595, Waters said it addresses an “urgent” public safety concern for legitimate businesses with no recourse but to operate in only cash while also providing clarity for banks.

Rep. Patrick McHenry (R-N.C.), Ranking Member, House Financial Services Committee

McHenry said Republicans stand ready to work across the aisle with Democrats, noting that H.R. 389 is a “good example” of bipartisanship being successful in crafting the “strongest bill possible.” McHenry expressed his concern with the remainder of the markup agenda sending a “partisan message” to constituents. McHenry remarked that H.R. 1815 “sounds good,” but noted that the SEC already conducts investor testing, including interviews and surveys. McHenry questioned if the desired outcome of the legislation is a different outcome at the SEC, a different rule, or stop the SEC from promulgating rules altogether. McHenry noted he wrote to Waters requesting a delay of consideration of H.R. 1595, calling for “due diligence” and more than one hearing to consider this “massive change” to federal policy, saying he encouraged delay of the measure until “fundamental concerns” are addressed.

Markup

H.R. 389, the “Kleptocracy Asset Recovery Rewards Act”

Rep. Stephen Lynch (D-Mass.) introduced his bill and his Amendment in the Nature of a Substitute, which would establish a rewards program to incentivize individuals to notify U.S. law enforcement of assets stolen from foreign treasuries and illegally transferred to the U.S., saying it would allow law enforcement to identify, recover, and return these assets and reduce the risk of terrorist financing. Lynch added that $1 trillion is lost yearly to corruption around the world, much of which is used to support organized crime, destabilizes institutions, and undermines the rule of law. Reps. Ted Budd (R-N.C.), Emanuel Cleaver (D-Mo.), McHenry and Waters expressed their support for the bill, while Rep. Steve Stivers (R-Ohio) expressed concerns about clarifying certain sections.

The amended measure was favorably reported to the House by a voice vote.

H.R. 1856, the “Ending Homelessness Act of 2019”

Waters introduced her bill and her Amendment in the Nature of a Substitute, which would provide $13.27 billion in new funding over five years to federal programs and initiatives to combat homelessness in the U.S. Waters said housing is a basic human right, and the committee has an obligation to provide the resources necessary to ensure every American has a safe and affordable place to call home. Reps. Carolyn Maloney (D-N.Y.), Lacy Clay (D-Mo.), David Scott (D-Ga.), Denny Heck (D-Wash.), Ben McAdams (D-Utah), Greg Meeks (D-N.Y.), Alma Adams (D-N.C.) and Alfred Lawson (D-Fla.) expressed their support of the legislation. Reps. Sean Duffy (R-Wis.) and McHenry spoke in opposition to the legislation.

Amendment Offered by Rep. Stivers

Stivers offered an amendment that would harmonize the definition of homelessness between the Department of Housing and Urban Development (HUD) and the Department of Education, explaining that the HUD definition of homelessness excludes anyone under age 18. Waters committed to working on an amendment to address this issue before the bill goes to the House floor, and Stivers withdrew the amendment.

Amendment Offered by Rep. Duffy

Duffy offered an amendment that would provide enhanced housing assistance to children aging out of the foster care system. The amendment was ruled not germane, as parts of the amendment did not fall within the scope of the bill.

Amendment Offered by Rep. Mooney

Rep. Alex Mooney (R-W.Va.) offered an amendment that would require at least 35 percent of any resources under the legislation be dedicated to programs serving rural communities. The amendment was not adopted in a 26-29 vote.

Amendment Offered by Rep. Loudermilk

Rep. Barry Loudermilk (R-Ga.) offered an amendment that would move the bill under the appropriations process to ensure Congress has proper oversight. The amendment was not adopted in a 26-31 vote.

Amendment Offered by Rep. Duffy

Duffy offered an amendment that would address cost issues not considered in the underlying legislation. The amendment was not adopted in a 0-57 vote.

Amendment Offered by Rep. Posey

Rep. Bill Posey (R-Fla.) offered an amendment that would require HUD to prioritize awarding grants to local communities which have enacted policies to leverage greater private sector participation in providing low-income housing. Heck offered a secondary amendment. The secondary amendment and underlying amendment were adopted.

Amendment Offered by Rep. Barr

Rep. Andy Barr (R-Ky.) offered an amendment that would strike the requirement for the new emergency relief grants appropriated by the legislation to only be awarded to applicants who agree to adopt a housing-first model in assisting the homeless. Rep. Rashida Tlaib (D-Mich.) offered a secondary amendment. The secondary amendment was adopted in a 31-26 vote, and the underlying amendment was adopted in a voice vote.

Amendment Offered by Rep. Huizenga

Rep. Bill Huizenga (R-Mich.) offered an amendment that would codify that the status of an organization as faith-based may not be a basis for discrimination. The amendment was adopted in a voice vote.

Amendment Offered by Rep. Huizenga

Huizenga offered an amendment that would limit the amount of money in the underlying legislation that could be spent in the 25 largest metropolitan statistical areas. The amendment was not adopted in a 26-33 vote.

The amended measure was favorably reported to the House by a vote of 32-26.

H.R. 1815, the “SEC Disclosure Effectiveness Testing Act”

Rep. Sean Casten (D-Ill.) introduced his bill and his Amendment in the Nature of a Substitute, which would require the SEC to conduct investor testing., and provides the SEC’s Office of the Investor Advocate with the authority to conduct testing and make the results and data public. Casten said the bill had one intent, which is to ensure disclosures are fair and concise. Casten explained that the SEC’s proposed Form CRS must inform investors of potential conflicts, saying the intent is not to delay the process, but to “do it right.” Speaking in support of the bill were Reps. Bill Foster (D-Ill.), Maloney, Waters and Lynch. Maloney said that the testing of proposed Regulation Best Interest (Reg BI) was too short, calling Casten’s bill “common sense.” Lynch said he supported the bill but noted requiring one-on-one interviews or national surveys in every care may not be the most “precise” way to gather whether investors understand these documents, so flexibility is needed. Lynch added that the average SEC rulemaking takes three to four years to finalize, so it is important to not make that window even longer for rules meant to protect investors.

Speaking in opposition to the bill were Reps. French Hill (R-Ark.), Trey Hollingsworth (R-Ind.), Warren Davidson (R-Ohio), McHenry, Huizenga, Barr and Stivers. Hill commended the intent to provide clear, concise, easy to understand information to investors, but pointed out that the bill as written would “constrain” the SEC from following its core mission and delay regulations, in particular the new investor protections in Reg BI. Hill and others pointed out the bill could create an “infinite feedback loop,” citing a letter from three former SEC commissioners that said there is no evidence a bill requiring investor testing is necessary because such testing has been standard practice at the SEC for years. McHenry said the bill is “poorly designed,” and criticized that it was targeted at Reg BI and Form CRS, which have already been tested. Huizenga noted that Reg BI “significantly” raises the standard of care for retail investors, and the bill would hinder investor protection. Hollingsworth noted the bill would require the SEC to review more than 600 regulations in the required look-back.

The amended measure was favorably reported to the House by a vote of 33-26.

H.R. 1595, the “Secure and Fair Enforcement Banking Act of 2019”

Rep. Ed Perlmutter (D-Colo.) introduced his bill and his Amendment in the Nature of a Substitute, which would create a safe harbor for depository institutions to serve cannabis-related businesses that are legal in the states in which they operate. Perlmutter noted that 47 states plus Guam and the District of Columbia have legalized some level of marijuana use, and the legislation allows legitimate businesses in these states to access banking services, including checking accounts, payroll services, lending services, and credit, noting the legislation has 151 cosponsors. Reps. Denver Riggleman (R-Va.), Nydia Velazquez (D-N.Y.), Katie Porter (D-Calif.), Heck, Scott, Waters, Stivers, and Maloney spoke in support of the bill. Scott noted the bill gives important regulatory certainty to institutions that want to bank legitimate cannabis businesses and ensure these businesses would no longer need to operate exclusively in cash.

In opposition to the bill were Reps. Blaine Luetkemeyer (R-Mo.), and McHenry. McHenry said the legislation is the “single largest rewrite of drug policy” Congress has ever undertaken, criticizing that there has only been one hearing on it. Luetkemeyer noted that Republicans asked to delay the markup until concerns about the legislation could be addressed, including how regulatory agencies would implement the bill, how anti-money laundering rules would be enforced, and how the committee would ensure there were no unintended consequences, among others.

Amendment Offered by Rep. Luetkemeyer

Luetkemeyer offered an amendment that would provide other legally operating businesses the same privileges that the underlying legislation provides to cannabis businesses, particularly industries affected by Operation Choke Point. The amendment was ruled not germane, as the amendment did not fall within the subject matter of the bill.

Amendment Offered by Rep. Porter

Porter offered an amendment that would make clear that de novo banks and credit unions are also protected under the underlying legislation. The amendment was adopted.

Amendment Offered by Rep. Barr

Barr offered an amendment that would require a certification by the Secretary of the Treasury that the legislation would not leave any financial institution more susceptible to illicit financial activities or money laundering and that the legislation does not inhibit a financial institution’s ability to comply with Bank Secrecy Act, anti-money laundering, know your customer, or reporting requirements associated with suspicious activity reports and currency transaction reports. The amendment was not adopted in a 27-33 vote.

Amendment Offered by Rep. Rose

Rep. John Rose (R-Tenn.) offered an amendment that would require financial institutions to provide attestations that they have internal controls to ensure that no funds have been deposited that have been associated with illegal organizations. The amendment was not adopted in a 27-33 vote.

Amendment Offered by Rep. Stivers

Stivers offered an amendment that would clarify that insurers are included under the legislation’s safe harbor provision. The amendment was adopted in a voice vote.

Amendment Offered by Rep. Duffy

Duffy offered an amendment that would prevent financial institutions from providing services to legitimate cannabis-related businesses that are located within 1,000 feet of a school, youth center, public park, childcare facility, housing facility owned by a public housing authority, civic center, or designated drug-free zone. The amendment was not adopted in a 26-34 vote.

Amendment Offered by Rep. Barr

Barr offered an amendment that would limit the legislation to legal industrial hemp businesses rather than extending it to all cannabis-related businesses. The amendment was not adopted in a 18-42 vote.

Amendment Offered by Rep. Huizenga

Huizenga offered an amendment that would provide clarification about the classification and schedule of the controlled substance before the bill becomes effective. Perlmutter stated that the committee is not in the position to declassify the drug, adding that he does not believe the amendment is germane. The amendment was withdrawn.

Amendment Offered by Rep. Huizenga

Huizenga offered an amendment that would prevent the bill from moving forward until all regulators are in agreement about how the bill would be implemented. The amendment was not adopted in a 25-35 vote.

Amendment Offered by Rep. Tipton

Tipton offered an amendment that would safeguard against the abuse of the fin services system by cartels and bad actors. Perlmutter said he would work with Tipton on these issues and the amendment was withdrawn.

Amendment Offered by Rep. Tipton

Tipton offered an amendment that would have the Comptroller General study marijuana-related suspicious activity reports dealing with transnational criminal organizations. There was bipartisan support for the amendment and it was adopted by voice vote.

The amended measure was favorably reported to the House by a vote of 45-15.

H.R. 1500, the “Consumers First Act”

Waters introduced her bill and her Amendment in the Nature of a Substitute, which would reverse many of the decisions made by the Trump administration regarding the Consumer Financial Protection Bureau.

Amendment Offered by Rep. Stivers

Stivers offered an amendment that would create an independent inspector general at the CFPB. The amendment was withdrawn due to not being germane.

Amendment Offered by Rep. Stivers

Stivers offered an amendment that would create an office of an inspector general inside the CFPB. The amendment was not adopted in a 26-34 vote.

Amendment Offered by Rep. Steil

Rep. Bryan Steil (R-Wis.) offered an amendment that would strike any negative language in the bill and replace it with language requiring the GAO to conduct a study on the CFPB, to include its effectiveness and efficiency in meeting its obligations. The amendment was not adopted in a 26-34 vote.

Amendment Offered by Rep. Luetkemeyer

Luetkemeyer offered an amendment that would reorganize the leadership structure at the CFPB to add more accountability by creating a five-person commission with stated terms, rather than a single director.   The amendment was withdrawn after a bipartisan commitment to discuss the issue.

Amendment Offered by Rep. Barr

Barr offered an amendment that would place the CFPB on the regular appropriations process, adding a “much needed layer of accountability the agency currently lacks.” The amendment was not adopted in a 26-34 vote.

The amended measure was favorably reported to the House by a vote of 34-26.

For more information on this markup, please click here.