Following the financial crisis of 2008, the Obama administration passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in 2010. The Act is a sweeping piece of legislation intended to regulate the American financial industry to protect consumers and to decrease the risk of another financial crisis. Both the Senate and the House of Representatives voted on the Dodd-Frank Act largely along party lines – Democrats in favor and Republicans against. Republicans have long argued that the regulations imposed by Dodd-Frank are hurting banks and consumers, and stymying economic growth.

The CHOICE Act

Since the 2016 election, President Donald Trump and Republican lawmakers have intensified their efforts to repeal Dodd-Frank. In early June 2017, the House voted in favor of a bill that would roll back many of the regulations and protections established by Dodd-Frank. The bill, called the Financial CHOICE Act (CHOICE Act), was approved 233-186, again largely along party lines.

The CHOICE Act, if enacted into law, would repeal significant portions of Dodd-Frank. Three of the most significant measures prescribed in the CHOICE Act are:

• A significant reduction of the authority of the Consumer Financial Protection Bureau (CFPB)
• The elimination of the Volcker rule, which restricts banks from engaging in certain speculative activity
• The elimination of the Labor Department’s fiduciary rule, which requires brokers to act in the best interest of their clients when counseling them about retirement

Implications for Whistleblowers

The Security and Exchange Commission’s (SEC) whistleblower program provides that whistleblowers who report misconduct to the SEC can receive an award of between 10 and 30 percent of the money collected as a result of the SEC’s enforcement action. Under current law, whistleblowers who were themselves co-conspirators in the wrongdoing they report are eligible to receive an award, provided that they have not been criminally convicted or charged for the same or related conduct.

One of the changes made by the Choice Act bars co-conspirators from receiving such awards for reporting such misconduct. We previously posted a blog about this proposed amendment and described the consequences of this change in the law. In our view, barring wrongdoers from collecting rewards could undermine SEC enforcement efforts because lower-level players will have no incentive to bring information to the SEC that might enable it to identify and punish those guilty of fraudulent practices that harm the investing public. This outcome is consistent with Republicans’ desire to lessen the regulatory oversight of financial institutions.

Where Will the CHOICE Act Go from Here?

Having passed in the House of Representatives, the CHOICE Act goes on to the Senate. The bill is not likely to pass in the Senate because Republicans do not have the 60 votes required and Democrats, who have termed the legislation the “Wrong Choice Act,” are unified in their staunch opposition. If, however, the bill were to make it out of the Senate it would likely become law, as President Trump has made it clear that he supports a repeal of Dodd-Frank.