Association Executives Urge Congress to Reform Dodd–Frank

In testimony before the House Financial Services Committee ("HFS"), executives from SIFMA and the Investment Company Institute, et. al., urged Congress to consider specific reforms to the Dodd-Frank Act ("DFA").

HFS Chair French Hill opened the hearing asserting that Dodd-Frank has failed to deliver on its promises, instead imposing "one-size-fits-all mandates" that punished community banks and fueled a decline in US IPOs. He criticized the creation of agencies like the CFPB for operating with "unprecedented autonomy," and argued that the SEC’s expanded powers have led to "regulatory overreach" and "mission creep" into "areas historically governed by state law." He requested recommendations on "thoughtful, bipartisan reforms" to reduce unnecessary rules and empower institutions to better serve families, small businesses, and local communities.

SIFMA President Kenneth E. Bentsen recommended review of numerous DFA provisions, to:

(i) reconsider enhanced capital and liquidity requirements that duplicate or exceed Basel standards, rely on outdated stress test assumptions, or impose inflexible requirements that hinder bank participation in capital and Treasury markets;

(ii) ensure that enhanced prudential standards are "proportionate to the size and risks" of foreign banking organizations and regional banks;

(iii) revise the SRO fee filing process under Exchange Act Section 19(b) ("Registration, responsibilities, and oversight of self-regulatory organizations");

(iv) clarify and simplifying municipal advisor regulations to apply only to "explicitly engaged" advisors;

(v) reform the cross-border derivatives framework to limit extraterritorial application of DFA Title VII ("Wall Street Transparency and Accountability") rules to activities posing a "direct and significant risk" to the US;

(vi) harmonize margin and capital requirements across the CFTC, SEC, and bank regulators;

(vii) modernize the swap dealer and severities-based swap dealer regimes;

(viii) enhance CFTC–SEC coordination on Title VII implementation;

(ix) revise Regulation AB II to streamline "prescriptive, inflexible, and excessive" asset-level disclosure requirements;

(x) repeal DFA Section 621 ("Conflicts of interest") and SEC Rule 192 ("Conflicts of interest relating to certain securitizations') due to their "overly broad and vague" prohibitions on securitization conflicts;

(xi) clarify that securitization trusts are not "covered persons" under DFA Section 1002 ("Definitions");

(xii) recalibrate capital and liquidity standards for securitization positions;

(xiii) refine the FSOC’s non-bank SIFI designation process;

(xiv) repeal DFA Section 956’s ("Enhanced compensation structure reporting") "duplicative" incentive compensation rules; and

(xv) amend DFA Section 1033 ("Consumer rights to access information") to ensure that privacy and liability protections apply "regardless of whether the entity holding the data is a federally regulated financial institution."

Mr. Bentsen also recommended reviewing the SEC’s securities lending reporting rule (Rule 10c-1a) to limit its scope to traditional lending arrangements and coordinate disclosures with short sale reporting, as well as revising the SEC’s short selling rule (Rule 13f-2) to reduce "granular reporting" requirements and better align it with the securities lending disclosure framework.

Investment Company Institute Chief Government Affairs Officer Tom Quaadman recommended the committee pursue a range of reforms including:

(i) encouraging the FSOC to restore its 2019 guidance to promote "process, certainty, and transparency," particularly in the use of its SIFI designation authority;

(ii) passing the FSOC Improvement Act of 2025 to ensure the Council considers activity-based regulation before designating firms as systemically important;

(iii) reframing DFA Section 120 ("Additional standards applicable to activities or practices for financial stability purposes") to preserve "final consideration and rulemaking" with relevant expert agencies while allowing FSOC to highlight regulatory gaps for potential congressional action;

(iv) confirming regulatory agency jurisdiction by reducing overlapping regulation of registered funds, including through revival of 2015 House-passed legislation that would restore exclusive SEC oversight for advisers to funds investing solely in financial derivatives;

(v) clarifying the Volcker Rule to "make clear that regulated funds are entirely out of scope" and reaffirm the importance of agency expertise;

(vi) enhancing the governance and accountability of the Financial Stability Board by expanding its Steering Committee to include more market regulators, ensuring greater weight is given to SEC and CFTC input, and directing US authorities to assert more influence when US markets are primarily affected;

(vii) supporting the bipartisan GROWTH Act to permit deferral of capital gains taxes on reinvested mutual fund distributions;

(viii) encouraging the SEC to advance ETF innovation by allowing mutual fund and ETF share classes within a single structure and broadening the asset classes eligible for semi-transparent ETFs;

(ix) expanding retail investor access to private markets;

(x) eliminating outdated regulatory costs and burdens; and

(xi) modernizing fund governance requirements.