Aug.House Subcommittee Approves H .R. 2827 and H.R. 6161

AT TODAY’S HOUSE FINANCIAL SERVICES SUBCOMMITTEE MARKUP, members approved H.R. 2827, introduced by Rep. Robert Dold (R-Ill.), by a vote of 20 to 10 with 1 present. The bill seeks to clarify the definition of “municipal advisor,” and introduce exemptions to the municipal advisor definition. Dold drafted the legislation in response to the proposed municipal advisor rule promulgated by the Securities and Exchange Commission (SEC) as authorized by Section 975 of the Dodd-Frank Act.

Dold said the SEC’s proposed rule extends “far beyond” the Congressional intent of Section 975 and creates “serious and unnecessary problems for municipalities.” He added that municipalities and the financial services sector also object to the SEC’s proposed rule, noting that the SEC received more than 1000 comment letters on the proposal. In closing, Dold said that his legislation will give the SEC “legislative guidance” to ensure that the municipal advisor definition is not “overly broad, unduly burdensome, unworkable or damaging to municipal governments.”

Dold and Rep. Gwen Moore (D-Wis.) announced that they will be offering a manager’s amendment at the full Committee markup that incorporates Members’ suggestions from both sides of the aisle. Among other changes, the manager’s amendment will: reinstate a federal fiduciary duty standard; ensure that the exemption for elected and appointed officials is “sufficiently” broad; and add a specific exemption for auditors and accountants.

The Subcommittee also approved H.R. 6161, the Fostering Innovation Act, by a vote of 18 to 15. Introduced by Rep. Michael Fitzpatrick (R-Pa.), the bill would provide an exemption for low-revenue companies from certain SEC regulations by revising the definition of “accelerated filer.”

Amendments to H.R. 2827 

Hurt Amendment (Passed by Voice Vote)

Rep. Robert Hurt (R-Va.) introduced an amendment to clarify the definition of municipal advisor and add an exemption for obligated persons associated with non-profit universities. The amendment was universally praised on both sides of the aisle and was unanimously approved by voice vote.

Of note, Rep. Maxine Waters (D-Calif.) offered a substantive amendment to further clarify the definition of municipal advisor and to limit the scope of the legislation’s exemptions. Specifically, the amendment would broaden the definition of municipal advisor and clearly define “investment strategies.” After a brief dialogue with Dold, Waters withdrew her amendment, informing Members that her concerns will be addressed in the manager’s amendment that Dold and Moore will offer at the full Committee markup.

Amendments to H.R. 6161 

No amendments were offered to the underlying legislation.

Democratic Members unanimously opposed the legislation, expressing a concern that the bill would further weaken the investor protections contained within Section 404 of the Sarbanes-Oxley Act.

For testimony and a webcast of the hearing, please click here.