Home News Galvin Blasts Dodd-Frank Replacement as “Gift” to Wall Street

Galvin Blasts Dodd-Frank Replacement as “Gift” to Wall Street

William Galvin, the chief securities regulator for Massachusetts, sent a letter to House Financial Services Committee chairman Jeb Hensarling detailing his opposition to the Financial CHOICE Act – calling the legislation “a gift to the investment industry and Wall Street special interests.”

The bill is the Republican alternative to the Dodd-Frank Act and stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs. The original bill was approved by the House Financial Services Committee in September 2016, and a revised version will be discussed today by the committee.

The legislation seeks to roll back certain Dodd-Frank banking and securities regulations and purports to hold Wall Street accountable for financial wrongdoing, end taxpayer-funded bailouts of large financial institutions, enact tougher penalties for those convicted of financial fraud and insider trading, and seeks to reduce the regulatory burden on well-capitalized community banks and credit unions. Galvin disagrees.

“While the preamble to the Act uses the language of hope, choice, and stability, the substance of the bill shows that such claims are entirely disingenuous,” said Galvin. “Numerous provisions of the Act will reduce transparency, expose retail investors to unjustified risks, and promote conflicts of interest that will harm retail investors.”

Galvin’s letter addresses three main points: the need to protect the states’ police powers relating to securities; opposition to provisions that preempt state regulatory authority; and opposition to language that would revoke the Department of Labor’s fiduciary rule.

Galvin noted that the states are effective early responders against securities fraud and stressed the importance of maintaining their independent authority rather than forcing federal and state enforcement coordination – which he considers “thinly-veiled attempts to tie the hands of the states.”

“Having the states take a back seat during investigations that involve more than one agency would put more investors in harm’s way for longer periods of time and thwart investor protection,” said Galvin.

He acknowledged that his office has seen successful enforcement actions that were the result of cooperation between his office and federal agencies, but that the coordination was voluntary.

As a fervent defender of the DOL fiduciary rule, Galvin urged the committee to remove provisions that revoke the rule that requires any person providing retirement investment advice to act in their client’s best interest.

Several witnesses that support the bill are scheduled to appear before the House Financial Services Committee on Wednesday to discuss the legislation. The committee has received submitted testimony from representatives from the Cato Institute, R Street Institute, The Heritage Foundation, and American Enterprise Institute.

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