[House Report 115-3]
[From the U.S. Government Publishing Office]


115th Congress    }                                    {        Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                    {         115-3

======================================================================
 
   PROVIDING FOR CONSIDERATION OF THE BILL (H.R. 78) TO IMPROVE THE 
 CONSIDERATION BY THE SECURITIES AND EXCHANGE COMMISSION OF THE COSTS 
AND BENEFITS OF ITS REGULATIONS AND ORDERS; PROVIDING FOR CONSIDERATION 
  OF THE BILL (H.R. 238) TO REAUTHORIZE THE COMMODITY FUTURES TRADING 
 COMMISSION, TO BETTER PROTECT FUTURES CUSTOMERS, TO PROVIDE END-USERS 
WITH MARKET CERTAINTY, TO MAKE BASIC REFORMS TO ENSURE TRANSPARENCY AND 
 ACCOUNTABILITY AT THE COMMISSION, TO HELP FARMERS, RANCHERS, AND END-
  USERS MANAGE RISKS, TO HELP KEEP CONSUMER COSTS LOW, AND FOR OTHER 
                    PURPOSES; AND FOR OTHER PURPOSES

                                _______
                                

  January 10, 2017.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

              Mr. Newhouse, from the Committee on Rules, 
                        submitted the following

                              R E P O R T

                       [To accompany H. Res. 40]

    The Committee on Rules, having had under consideration 
House Resolution 40, by a nonrecord vote, report the same to 
the House with the recommendation that the resolution be 
adopted.

                SUMMARY OF PROVISIONS OF THE RESOLUTION

    The resolution provides for consideration of H.R. 78, the 
SEC Regulatory Accountability Act, under a structured rule. The 
resolution provides one hour of general debate equally divided 
and controlled by the chair and ranking minority member of the 
Committee on Financial Services or their respective designees. 
The resolution waives all points of order against consideration 
of the bill. The resolution provides that the bill shall be 
considered as read. The resolution waives all points of order 
against provisions in the bill. The resolution makes in order 
only those amendments printed in part A of this report. Each 
such amendment may be offered only in the order printed in this 
report, may be offered only by a Member designated in this 
report, shall be considered as read, shall be debatable for the 
time specified in this report equally divided and controlled by 
the proponent and an opponent, shall not be subject to 
amendment, and shall not be subject to a demand for division of 
the question in the House or in the Committee of the Whole. The 
resolution waives all points of order against the amendments 
printed in part A of this report. The resolution provides one 
motion to recommit with or without instructions.
    Section 2 of the resolution provides for consideration of 
H.R. 238, the Commodity End-User Relief Act, under a structured 
rule. The resolution provides one hour of general debate 
equally divided and controlled by the Majority Leader and the 
Minority Leader or their respective designees. The resolution 
waives all points of order against consideration of the bill. 
The resolution makes in order as original text for the purpose 
of amendment an amendment in the nature of a substitute 
consisting of the text of the Rules Committee Print 115-2, and 
provides that it shall be considered as read. The resolution 
waives all points of order against that amendment in the nature 
of a substitute. The resolution makes in order only those 
further amendments printed in part B of this report. Each such 
amendment may be offered only in the order printed in this 
report, may be offered only by a Member designated in this 
report, shall be considered as read, shall be debatable for the 
time specified in this report equally divided and controlled by 
the proponent and an opponent, shall not be subject to 
amendment, and shall not be subject to a demand for division of 
the question in the House or in the Committee of the Whole. The 
resolution waives all points of order against the amendments 
printed in part B of this report. The resolution provides one 
motion to recommit with or without instructions.
    Section 3 of the resolution provides that on any 
legislative day during the period from January 16, 2017, 
through January 20, 2017: the Journal of the proceedings of the 
previous day shall be considered as approved; and the Chair may 
at any time declare the House adjourned to meet at a date and 
time to be announced by the Chair in declaring the adjournment.
    Section 4 of the resolution provides that the Speaker may 
appoint Members to perform the duties of the Chair for the 
duration of the period addressed by section 3 of the resolution 
as though under clause 8(a) of rule I.
    Section 5 of the resolution provides that it shall be in 
order at any time on the legislative day of January 13, 2017, 
for the Speaker to entertain motions that the House suspend the 
rules as though under clause 1 of rule XV, and that the Speaker 
or his designee shall consult with the Minority Leader or her 
designee on the designation of any matter for consideration 
pursuant to this section.

                         EXPLANATION OF WAIVERS

    Although the resolution waives all points of order against 
consideration of H.R. 78, the Committee is not aware of any 
points of order. The waiver is prophylactic in nature.
    Although the resolution waives all points of order against 
provisions in H.R. 78, the Committee is not aware of any points 
of order. The waiver is prophylactic in nature.
    Although the resolution waives all points of order against 
the amendments to H.R. 78 printed in part A of this report, the 
Committee is not aware of any points of order. The waiver is 
prophylactic in nature.
    Although the resolution waives all points of order against 
consideration of H.R. 238, the Committee is not aware of any 
points of order. The waiver is prophylactic in nature.
    Although the resolution waives all points of order against 
the amendment in the nature of a substitute made in order as 
original text, the Committee is not aware of any points of 
order. The waiver is prophylactic in nature.
    Although the resolution waives all points of order against 
the amendments to H.R. 238 printed in part B of this report, 
the Committee is not aware of any points of order. The waiver 
is prophylactic in nature.

                            COMMITTEE VOTES

    The results of each record vote on an amendment or motion 
to report, together with the names of those voting for and 
against, are printed below:

Rules Committee record vote No. 8

    Motion by Mr. McGovern to report open rules for H.R. 78 and 
H.R. 238.
    Defeated: 4-8

----------------------------------------------------------------------------------------------------------------
                Majority Members                      Vote               Minority Members               Vote
----------------------------------------------------------------------------------------------------------------
Mr. Cole........................................          Nay   Ms. Slaughter.....................          Yea
Mr. Woodall.....................................          Nay   Mr. McGovern......................          Yea
Mr. Burgess.....................................          Nay   Mr. Hastings of Florida...........          Yea
Mr. Collins.....................................  ............  Mr. Polis.........................          Yea
Mr. Byrne.......................................          Nay
Mr. Newhouse....................................          Nay
Mr. Buck........................................          Nay
Ms. Cheney......................................          Nay
Mr. Sessions, Chairman..........................          Nay
----------------------------------------------------------------------------------------------------------------

      SUMMARY OF THE AMENDMENTS TO H.R. 78 IN PART A MADE IN ORDER

    1. Waters (CA): Requires the SEC to identify, analyze and 
address potential conflicts of interest related to its 
rulemakings. (10 minutes)
    2. Velazquez (NY): Requires the SEC consider the protection 
of investors, in addition to promoting efficiency, competition, 
and capital formation when conducting such a review and also 
expressly instructs the SEC to consider the public interest, 
the protection of investors as well as the promotion of 
efficiency, competition, and capital formation when conducting 
such a review of existing SEC regulations. (10 minutes)
    3. Green, Al (TX): Exempts regulations promulgated to 
maintain or support U.S. financial stability or prevent or 
reduce systemic risk. (10 minutes)
    4. DeSaulnier (CA): Requires the Chairman of the SEC and 
his immediate family to divest from too-big-to-fail banks. (10 
minutes)
    5. Raskin (MD): Requires the Chairman of the Securities and 
Exchange Commission to be trained on ethical standards and 
codes of conduct to ensure all regulations enacted are not done 
so with a conflict of interest, specifically regarding prior 
employment and legal representation of too-big-to-fail banks. 
(10 minutes)

      SUMMARY OF THE AMENDMENTS TO H.R 238 IN PART B MADE IN ORDER

    1. Aderholt (AL): Amends the Commodity Exchange Act to give 
the Commodity Futures Trading Commission authority to designate 
other agencies to manage its leases. (10 minutes)
    2. Scott, Austin (GA): Reforms the Customer Protection Fund 
at the CFTC to amend the size of the fund, annual expenditures 
from the fund and return excess balance to the Treasury. (10 
minutes)
    3. Conaway (TX): Makes technical and conforming changes. 
(10 minutes)
    4. Conaway (TX): Makes clear Congress's intent that the 
Commission may impose and implement position limits as it finds 
necessary, provided the Commission makes a finding prior to 
imposing such limits. It makes no changes to the longstanding 
federal position limits regime for the enumerated agricultural 
commodities or the existing statutory requirements that 
Designated Contract Markets impose position limits or 
accountability levels on all contracts. (10 minutes)
    5. Duffy (WI), Scott, David (GA): Prohibits the CFTC from 
compelling the production of algorithmic trading source code 
and similar intellectual property unless it has issued a 
subpoena. (10 minutes)
    6. LaMalfa (CA): Prevents a situation in which an end-user 
loses its ability to rely on the end-user exception to the 
clearing requirement due simply to the positive performance of 
transactions entered into solely to mitigate the prospect of 
falling revenues and asset values. (10 minutes)
    7. Lucas (OK): Exempts all inter-affiliate transactions 
from being regulated as ``swaps'' under the Dodd-Frank related 
provisions of the Commodity Exchange Act (``CEA'') and 
Commodity Futures Trading Commission (``CFTC'') regulations 
promulgated thereunder. (10 minutes)
    8. Hartzler (MO): Delays implementation of the CFTC 
Ownership and Control Reports Rule until the Chairman 
determines the rule has been amended by adjusting reporting 
trading volume levels to 300 contracts per day, removing the 
requirements for natural person controller data, and ensuring 
the rule does not require entities to violate foreign privacy 
laws. (10 minutes)

          PART A--TEXT OF AMENDMENTS TO H.R. 78 MADE IN ORDER

1. An Amendment To Be Offered by Representative Waters of California or 
                 Her Designee, Debatable for 10 Minutes

  Page 3, line 3, strike ``and''.
  Page 3, line 8, strike the period and insert ``; and''.
  Page 3, after line 8, insert the following:
                  ``(E) in consultation with the Office of 
                Ethics Counsel of the Commission, identify any 
                former nongovernmental employer of a 
                Commissioner, Director, Deputy Director, 
                Associate Director, or Assistant Director that 
                would receive direct or indirect benefit from a 
                rule or regulation, analyze the benefits to 
                such employer, and whether the regulation 
                should be amended to address any potential 
                conflict of interest or appearance of a 
                conflict of interest.''.
  Page 6, after line 5, insert the following:
          ``(5) Conflicts of interest.--The Commission shall 
        identify the employers of any Commissioners, Directors, 
        Deputy Directors, Associate Directors, and Assistant 
        Directors who have left the Commission within five 
        years of the scheduled adoption of the final rule, and 
        whether such employers receive direct or indirect 
        benefits, and whether the Commission should amend the 
        rule to address the identified conflict of interest.''.
  Page 7, line 19, insert after the period the following: ``The 
assessment plan shall also include an analysis of whether and 
how any former nongovernmental employer of a Commissioner, 
Director, Deputy Director, Associate Director, or Assistant 
Director, or the current employer of a former Commissioner, 
Director, Deputy Director, Associate Director, or Assistant 
Director who departed the Commission within five years of the 
scheduled adoption of the regulation, directly and indirectly 
benefits from the regulation, and a recommendation as to 
whether such regulation should be amended to address the 
identified conflict of interest.''.
                              ----------                              


 2. An Amendment To Be Offered by Representative Velazquez of New York 
               or Her Designee, Debatable for 10 Minutes

  Page 4, line 1, insert after ``making'' the following: ``, in 
addition to being in the interest of protecting investors,''.
  Page 5, line 21, insert after the period the following: 
``Whenever pursuant to this paragraph the Commission is engaged 
in a review, it shall consider whether an action is necessary 
or appropriate in the public interest, the protection of 
investors, and whether the action will promote efficiency, 
competition, and capital formation.''.
                              ----------                              


 3. An Amendment To Be Offered by Representative Green of Texas or His 
                   Designee, Debatable for 10 Minutes

  Page 10, line 16, strike ``and''.
  Page 10, line 20, strike the first period and all that 
follows and insert ``; and''.
  Page 10, after line 20, insert the following:
                          ``(iv) a regulation promulgated to 
                        maintain or support U.S. financial 
                        stability or prevent or reduce systemic 
                        risk.''.
                              ----------                              


     4. An Amendment To Be Offered by Representative DeSaulnier of 
          California or His Designee, Debatable for 10 Minutes

  At the end of the bill, add the following new section:

SEC. 5. DIVESTITURE REQUIREMENT.

  The amendment made by section 2 shall not take effect until 
the Chairman of the Securities and Exchange Commission, and all 
immediate family members of the Chairman, divests all 
securities owned by the Chairman and such immediate family 
members of the Chairman from any financial institution 
regulated by the Securities and Exchange Commission to ensure 
that proper and fair rule-making is administered in accordance 
with this Act.
                              ----------                              


 5. An Amendment To Be Offered by Representative Raskin of Maryland or 
                 His Designee, Debatable for 10 Minutes

  At the end of the bill, add the following new section:

SEC. 5. TRAINING REQUIREMENT FOR THE CHAIRMAN AND COMMISSIONERS OF THE 
                    SEC.

  The amendment made by section 2 shall not take effect until 
the Chairman and each Commissioner of the Securities and 
Exchange Commission undergoes effective training on conduct and 
ethical standards to ensure all actions of the Commission are 
done in a manner free of conflicts of interest, specifically 
those related to prior employment at financial institutions and 
prior legal representation of financial institutions.
                              ----------                              


          PART B--TEXT OF AMENDMENTS TO H.R. 238 MADE IN ORDER

1. An Amendment To Be Offered by Representative Aderholt of Alabama or 
                 His Designee, Debatable for 10 Minutes

  Add at the end of title II the following:

SEC. 213. ELIMINATION OF CERTAIN LEASING AUTHORITY OF THE COMMISSION.

  Section 12(b)(3) of the Commodity Exchange Act (7 U.S.C. 
16(b)(3)) is amended--
          (1) by striking ``including, but not limited to,'' 
        and inserting ``excluding''; and
          (2) by adding at the end the following new sentence: 
        ``In the case of an existing lease contract entered 
        into under this paragraph, the Commission may not 
        extend the lease term, but may agree to any other 
        contract modification that does not result in any 
        additional cost to the Federal Government.''.
                              ----------                              


2. An Amendment To Be Offered by Representative Scott of Georgia or His 
                   Designee, Debatable for 10 Minutes

  At the end of title II, add the following:

SEC. 213. REFORM OF THE CUSTOMER PROTECTION FUND.

  Section 23(g) of the Commodity Exchange Act (7 U.S.C. 26(g)) 
is amended--
          (1) in paragraph (2)--
                  (A) in the matter preceding subparagraph (A), 
                by striking ``or fiscal year limitation'';
                  (B) in subparagraph (A), by striking ``; 
                and'' and inserting ``, without fiscal year 
                limitation;''; and
                  (C) in subparagraph (B), by striking 
                ``thereunder.'' and inserting ``, the total 
                amount of which shall not exceed $5,000,000 per 
                fiscal year.'';
          (2) in paragraph (3)(A), by striking ``unless the 
        balance of the Fund at the time the monetary judgment 
        is collected exceeds $100,000,000'' and inserting ``, 
        but only to the extent that the resulting balance of 
        the Fund does not exceed $50,000,000''; and
          (3) by redesignating paragraph (5) as paragraph (6) 
        and inserting after paragraph (4) the following:
          ``(5) Reversion to treasury.--Notwithstanding the 
        preceding provisions of this subsection, to the extent 
        the balance of the Fund exceeds $50,000,000, the excess 
        amount shall be deposited in the Treasury of the United 
        States as miscellaneous receipts.''.
                              ----------                              


3. An Amendment To Be Offered by Representative Conaway of Texas or His 
                   Designee, Debatable for 10 Minutes

  Page 32, after line 3, insert the following:
                  (L) Section 3a(68)(A)(i) of the Securities 
                Exchange Act of 1934 (15 U.S.C. 
                78c(a)(68)(A)(i)) is amended by striking 
                ``(47)(B)(x)'' and inserting ``(48)(B)(x)''.
                  (M) Section 3C(g)(3)(A)(v) of the Securities 
                Exchange Act of 1934 (15 U.S.C. 78c-
                3(g)(3)(A)(v)) is amended by striking 
                ``1a(10)'' and inserting ``1a(11)''.
                  (N) Section 6(g)(5)(B)(i) of the Securities 
                Exchange Act of 1934 (15 U.S.C. 
                78f(g)(5)(B)(i)) is amended--
                          (i) in sublcause (I), by striking 
                        ``1a(18)(B)(ii)'' and inserting 
                        ``1a(19)(B)(ii)''; and
                          (ii) in subclause (II), by striking 
                        ``1a(18)'' and inserting ``1a(19)''.
                  (O) Section 15F(h)(5)(A)(i) of the Securities 
                Exchange Act of 1934 (15 U.S.C. 78o-
                10(h)(5)(A)(i)) is amended by striking 
                ``1a(18)'' and inserting ``1a(19)''.
  Page 50, line 21, strike ``1a(10)(C)'' and insert 
``1a(11)(C)''.
                              ----------                              


4. An Amendment To Be Offered by Representative Conaway of Texas or His 
                   Designee, Debatable for 10 Minutes

  Page 40, line 4, strike ``paragraphs (2) and (5) of 
subsection (a)'' and insert ``paragraph (1)''.
  Add at the end of title III the following:

SEC. 318. REQUIREMENTS RELATED TO POSITION LIMITS.

  (a) In General.--Section 4a(a) of the Commodity Exchange Act 
(7 U.S.C. 6a(a)) is amended--
          (1) by striking paragraphs (2), (3), (5), and (6); 
        and
          (2) by redesignating paragraphs (4) and (7) as 
        paragraphs (2) and (3), respectively.
  (b) Bona Fide Hedging Transaction Definition.--Section 
4a(c)(2)(A)(i) of such Act (7 U.S.C. 6a(c)(2)(A)(i)) is amended 
by inserting ``normally'' before ``represents''.
  (c) Effective Date.--The amendments made by this section 
shall take effect on the date of the enactment of this section.
                              ----------                              


 5. An Amendment To Be Offered by Representative Duffy of Wisconsin or 
                 His Designee, Debatable for 10 Minutes

  Add at the end of title III the following:

SEC. 318. PROCEDURE FOR OBTAINING CERTAIN INTELLECTUAL PROPERTY.

  The Commodity Exchange Act (7 U.S.C. 1 et seq.) is amended by 
inserting after section 4t the following:

``SEC. 4U. PROCEDURE FOR OBTAINING CERTAIN INTELLECTUAL PROPERTY.

  ``The Commission is not authorized to compel persons to 
produce or furnish algorithmic trading source code or similar 
intellectual property to the Commission, unless the Commission 
first issues a subpoena.''.
                              ----------                              


 6. An Amendment To Be Offered by Representative LaMalfa of California 
               or His Designee, Debatable for 10 Minutes

  At the end of title III, insert the following:

SEC. ___. DETERMINATION OF PREDOMINANT ENGAGEMENT.

  Section 2(h)(7)(C) of the Commodity Exchange Act (7 U.S.C. 
2(h)(7)(C)), as amended by section 314 of this Act, is amended 
by adding at the end the following:
                          ``(v) In determining whether a person 
                        is predominantly engaged in a business 
                        or activity for purposes of clause 
                        (i)(VIII), there shall be excluded 
                        revenues and assets that are, or result 
                        from, any transaction that is entered 
                        into solely for purposes of hedging or 
                        mitigating commercial risk (as defined 
                        by the Commission for purposes of 
                        subparagraph (A)(ii)).''.
                              ----------                              


 7. An Amendment To Be Offered by Representative Lucas of Oklahoma or 
                 His Designee, Debatable for 10 Minutes

  At the end of title III, insert the following:

SEC. ___. TREATMENT OF TRANSACTIONS BETWEEN AFFILIATES.

  Section 1a(48) of the Commodity Exchange Act (7 U.S.C. 
1a(47)), as so redesignated by section 304(b)(1) of this Act, 
is amended by adding at the end the following:
                  ``(G) Treatment of transactions between 
                affiliates.--
                          ``(i) Exemption from swap rules.--An 
                        agreement, contract, or transaction 
                        described in subparagraphs (A) through 
                        (F) shall not be regulated as a swap 
                        under this Act if all of the following 
                        apply with respect to the agreement, 
                        contract, or transaction:
                                  ``(I) Affiliation.--1 
                                counterparty, directly or 
                                indirectly, holds a majority 
                                ownership interest in the other 
                                counterparty, or a third party, 
                                directly or indirectly, holds a 
                                majority ownership interest in 
                                both counterparties.
                                  ``(II) Financial 
                                statements.--The affiliated 
                                counterparty that holds the 
                                majority interest in the other 
                                counterparty or the third party 
                                that, directly or indirectly, 
                                holds the majority interests in 
                                both affiliated counterparties, 
                                reports its financial 
                                statements on a consolidated 
                                basis under generally accepted 
                                accounting principles or 
                                International Financial 
                                Reporting Standards, or other 
                                similar standards, and the 
                                financial statements include 
                                the financial results of the 
                                majority-owned affiliated 
                                counterparty or counterparties.
                          ``(ii) Reporting requirement.--If at 
                        least 1 counterparty to an agreement, 
                        contract, or transaction that meets the 
                        requirements of clause (i) is a swap 
                        dealer or major swap participant, that 
                        counterparty shall report the 
                        agreement, contract, or transaction 
                        pursuant to section 4r, within such 
                        time period as the Commission may by 
                        rule or regulation prescribe--
                                  ``(I) to a swap data 
                                repository; or
                                  ``(II) if there is no swap 
                                data repository that would 
                                accept the agreement, contract 
                                or transaction, to the 
                                Commission.
                          ``(iii) Risk management 
                        requirement.--If at least 1 
                        counterparty to an agreement, contract, 
                        or transaction that meets the 
                        requirements of clause (i) is a swap 
                        dealer or major swap participant, the 
                        agreement, contract, or transaction 
                        shall be subject to a centralized risk 
                        management program pursuant to section 
                        4s(j) that is reasonably designed to 
                        monitor and to manage the risks 
                        associated with the agreement, 
                        contract, or transaction.
                          ``(iv) Variation margin 
                        requirement.--Affiliated counterparties 
                        to an agreement, contract, or 
                        transaction that meets the requirements 
                        of clause (i) shall exchange variation 
                        margin to the extent prescribed under 
                        any rule promulgated by the Commission 
                        or any prudential regulator pursuant to 
                        section 4s(e).
                          ``(v) Anti-evasion requirement.--An 
                        agreement, contract, or transaction 
                        that meets the requirements of clause 
                        (i) shall not be structured to evade 
                        the Dodd-Frank Wall Street Reform and 
                        Consumer Protection Act in violation of 
                        any rule promulgated by the Commission 
                        pursuant to section 721(c) of such 
                        Act.''.
                              ----------                              


8. An Amendment To Be Offered by Representative Hartzler of Missouri or 
                 Her Designee, Debatable for 10 Minutes

  At the end of the bill, add the following:

SEC. ___. DELAY IN FULL IMPLEMENTATION OF THE FINAL RULE ON OWNERSHIP 
                    AND CONTROL REPORTING.

  The Commodity Futures Trading Commission may not enforce non-
compliance with the final rule titled ``Ownership and Control 
Reports, Forms 102/2S, 40/40S, and 71'' (78 FR 69178; November 
18, 2013) until the Commission votes to approve a final rule 
that has been amended to--
          (1) provide that the reportable trading volume level 
        shall be at least 300 contracts;
          (2) provide that the reporting entity shall not be 
        required to provide natural person controller data; and
          (3) provide that the reporting entity is not 
        obligated to supply data that violates foreign privacy 
        laws.

                                  [all]