The House Agriculture Committee, oversight committee for the CFTC, has favorably reported out H.R. 1573, which gives the SEC and CFTC an additional 18 months to adopt regulations implementing the derivatives provisions of the Dodd-Frank Act. The legislation gives the SEC and CFTC additional time to write and vet the rules governing derivatives, and brings the U.S. into alignment with the G-20 on financial reform. The legislation has the strong support of the securities and banking industries.
Since Dodd-Frank mandates a dual SEC-CFTC regulatory regime for derivatives, the legislation now goes to the Financial Services Committee, the oversight committee for the SEC, where approval is expected. Financial Services Committee Chair Spencer Bachus (R-AL) is a co-sponsor of HR 1573. After approval by the two oversight committees, the legislation is expected to pass the House.
The efforts of Dodd-Frank to increase transparency and stability in ther financial markets will be for naught if the regulatory process is rushed, said Ag Committee Chairman Frank Lucas (R-OK). It is time for Congress to acknowledge that Dodd-Frank set impractically tight deadlines for the implementation of dozens of regulations that will touch every segment of the economy, noted Chairman Lucas.
The legislation extends the statutory deadline by 18 months and gives regulators the time and data they need to develop thoughtful regulations without making substantive changes to the intent of the Dodd-Frank Act. It is important to note that H.R. 1573 maintains the current timeframe for defining the key terms of derivatives regulations for end-users, requires additional forums for public input, and retains the existing timelines for reporting over-the-counter contracts, which will allow regulators to develop rules based on hard data instead of estimates. In addition, the legislation neither repeals nor modifies the provisions of Dodd-Frank Title VII setting up a regulatory regime for derivatives.
The action by the Agriculture Committee comes after the release of a report by the CFTC’s Inspector General that highlighted the shortcomings of the cost-benefit analyses of rule proposals due to arbitrary and compressed deadlines.