A small yet critical legislative fix to the Dodd-Frank Act continues to appear on the radar of both chambers of Congress.
Removing the law’s indemnification provisions was recently considered by the House Financial Services, the House Agriculture, and the Senate Banking Committees. This technical fix has been strongly supported by The Depository Trust & Clearing Corporation since the 112th Congress.
“Eliminating the requirement for swap data repositories (SDRs) to obtain indemnification agreements before sharing information with regulators is a simple, noncontroversial measure,” stated Larry Thompson, DTCC Vice Chairman and General Counsel. “The indemnification provisions are a barrier to the ability of regulators – globally and within the U.S. – to utilize the transparency offered by SDRs to help mitigate risk. A legislative remedy is the only way to remove these provisions that threaten global information sharing and systemic risk oversight.”
In the House, indemnification correction amendments appear in standalone legislation in addition to Commodity Futures Trading Commission (CFTC) Reauthorization legislation.
In April, the Swap Data Repository and Clearinghouse Indemnification Correction Act of 2015 (H.R. 1847), was introduced by Rep. Rick Crawford (R-AR), Rep. Sean Patrick Maloney (D-NY), Rep. Bill Huizenga (R-MI) and Rep. Gwen Moore (D-WI). The House Financial Services Committee considered the legislation and on May 20, it unanimously voted to move the stand-alone bill out of Committee. A House floor vote on H.R. 1847 is expected this summer.
The House Agriculture Committee has oversight of the CFTC and, as a result, is responsible for periodically reauthorizing the Commission. Indemnification correction provisions were included in previous reauthorization legislation and also incorporated in a version introduced earlier this month. On May 14, the Committee passed its CFTC reauthorization legislation by voice vote. However, due to additional amendments in the bill, CFTC Chairman Timothy Massad, the Treasury Department, House Agriculture Ranking Member Rep. Collin Peterson (D-MN) and House Financial Services Ranking Member Maxine Waters (D-CA) voiced strong opposition. A House floor vote is expected in June.
In the Senate, removal of the indemnification provisions is part of the Banking Committee’s recent legislation to reform aspects of the financial services industry. This is significant as inclusion of this text marks the first time the Senate has taken legislative action to address the issue of indemnification.
In May, the Senate Banking Committee introduced the Financial Regulatory Improvement Act of 2015, which includes Section 603, the Swap Data Repository and Clearinghouse Indemnification Correction Act. While Democrats opposed the overall legislation and introduced a separate version for consideration, during a May 21 markup the Committee passed the Financial Regulatory Improvement Act of 2015 in a 12-10 vote (Senators voted along party lines). During opening remarks at the markup, Senate Banking Chairman Richard Shelby (R-AL) reinforced that the Committee vote is one step in a long process. Timing for a Senate floor vote has not yet been determined.
For more information, please view Removing Dodd-Frank’s Indemnification Provisions on DTCC.com. This page provides an overview of the Dodd-Frank Act’s indemnification requirements and outlines recent regulatory and industry support for removing these provisions.