House Lawmakers Introduce FSOC Reform Bill

Bipartisan members of the House Financial Services Committee introduced a bill that would require the Financial Stability Oversight Council ("FSOC") to explore and rule out alternative regulatory approaches before designating nonbank financial institutions as systemically important and placing them under the Federal Reserve's supervision.

The Financial Stability Oversight Council Improvement Act of 2025, sponsored by House Financial Services Committee Vice Chair Bill Huizenga and Ranking Member of the Subcommittee on Financial Institutions and Monetary Policy Bill Foster, states that the FSOC:

"may not vote on a proposed determination with respect to a U.S. nonbank financial company ... unless the Council first determines, in consultation with the company and the primary financial regulatory agency with respect to the company, that a different action by the Council or the agency (including the application of new or heightened standards and safeguards under ... ), or by the company under a written plan that is submitted promptly to the Council, is impracticable or insufficient to mitigate the threat that the company could pose to the financial stability of the United States."

The Investment Company Institute ("ICI") praised the bill with a warning that designating fund managers as SIFIs has "broad-reaching negative consequences." The ICI emphasized that such action should be based on "robust data and cost-benefit analysis." The ICI stated that passage of the legislation would provide greater certainty to registered funds, their managers, and "the more than 120 million investors they serve."