[House Report 115-903]
[From the U.S. Government Publishing Office]


115th Congress   }                                    {        Report
                        HOUSE OF REPRESENTATIVES
 2d Session      }                                    {       115-903

======================================================================



 
  CONSUMER FINANCIAL CHOICE AND CAPITAL MARKETS PROTECTION ACT OF 2017

                                _______
                                

August 24, 2018.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Hensarling, from the Committee on Financial Services, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 2319]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 2319) to protect the investment choices of 
investors in the United States, and for other purposes, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Consumer Financial Choice and Capital 
Markets Protection Act of 2018''.

SEC. 2. TREATMENT OF MONEY MARKET FUNDS UNDER THE INVESTMENT COMPANY 
                    ACT OF 1940.

  The Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) is 
amended by adding at the end the following:

``SEC. 66. MONEY MARKET FUNDS.

  ``(a) Definitions.--In this section--
          ``(1) the term `covered Federal assistance' means Federal 
        assistance used for the purpose of--
                  ``(A) making any loan to, or purchasing any stock, 
                equity interest, or debt obligation of, any money 
                market fund;
                  ``(B) guaranteeing any loan or debt issuance of any 
                money market fund; or
                  ``(C) entering into any assistance arrangement 
                (including tax breaks), loss sharing, or profit sharing 
                with any money market fund; and
          ``(2) the term `Federal assistance' means--
                  ``(A) insurance or guarantees by the Federal Deposit 
                Insurance Corporation;
                  ``(B) transactions involving the Secretary of the 
                Treasury; or
                  ``(C) the use of any advances from any Federal 
                Reserve credit facility or discount window, except to 
                the extent any part of a program or facility with 
                broad-based eligibility established in unusual or 
                exigent circumstances might be made available.
  ``(b) Election To Be a Stable Value Money Market Fund.--
          ``(1) In general.--Notwithstanding any other provision of 
        this title, any open-end investment company (or a separate 
        series thereof) that is a money market fund that relies on 
        section 270.2a-7 of title 17, Code of Federal Regulations, may, 
        in the prospectus included in its registration statement filed 
        under section 8, state that the company or series has elected 
        to compute the current price per share, for purposes of 
        distribution or redemption and repurchase, of any redeemable 
        security issued by the company or series by using the amortized 
        cost method of valuation, or the penny-rounding method of 
        pricing, regardless of whether its shareholders are limited to 
        natural persons, if--
                  ``(A) the company or series has as its objective the 
                generation of income and preservation of capital 
                through investment in short-term, high-quality debt 
                securities;
                  ``(B) the board of directors of the company or series 
                elects, on behalf of the company or series, to maintain 
                a stable net asset value per share or stable price per 
                share, by using the amortized cost valuation method, as 
                defined in section 270.2a-7(a) of title 17, Code of 
                Federal Regulations (or successor regulation), or the 
                penny-rounding pricing method, as defined in section 
                270.2a-7(a) of title 17, Code of Federal Regulations 
                (or successor regulation), and the board of directors 
                of the company has determined, in good faith, that--
                          ``(i) it is in the best interests of the 
                        company or series, and its shareholders, to do 
                        so; and
                          ``(ii) the money market fund will continue to 
                        use such method or methods only as long as the 
                        board of directors believes that the resulting 
                        share price fairly reflects the market-based 
                        net asset value per share of the company or 
                        series; and
                  ``(C) the company or series will comply with such 
                quality, maturity, diversification, liquidity, and 
                other requirements, including related procedural and 
                recordkeeping requirements, as the Commission, by rule 
                or regulation or order, may prescribe or has prescribed 
                as necessary or appropriate in the public interest or 
                for the protection of investors to the extent that such 
                requirements and provisions are not inconsistent with 
                this section.
          ``(2) Exemption from default liquidity fee requirements.--
                  ``(A) Elections under paragraph (1).--Notwithstanding 
                section 270.2a-7 of title 17, Code of Federal 
                Regulations (or successor regulation), no company or 
                series that makes the election under paragraph (1) 
                shall be subject to the default liquidity fee 
                requirements of section 270.2a-7(c)(2)(ii) of title 17, 
                Code of Federal Regulations (or successor regulation) 
                unless the board of directors of such company or series 
                elects, in the prospectus included in the registration 
                statement filed under section 8, to be subject to such 
                requirements.
                  ``(B) Other funds.--Notwithstanding section 270.2a-7 
                of title 17, Code of Federal Regulations (or successor 
                regulation), a company or series that does not make an 
                election under paragraph (1) shall not be subject to 
                the default liquidity fee requirements of section 
                270.2a-7(c)(2)(ii) of title 17, Code of Federal 
                Regulations (or successor regulation), if it states in 
                the prospectus included in the registration statement 
                filed under section 8, that the company or series 
                satisfies the provisions of subparagraphs (A) and (C) 
                of paragraph (1) and that the board of directors of 
                such company or series has elected for the company or 
                series to not be subject to the default liquidity fee 
                requirements.
  ``(c) Prohibition Against Federal Government Bailouts of Money Market 
Funds.--Notwithstanding any other provision of law (including 
regulations), covered Federal assistance may not be provided directly 
to any money market fund.
  ``(d) Disclosure of the Prohibition Against Federal Government 
Bailouts of Money Market Funds.--
          ``(1) In general.--No principal underwriter of a redeemable 
        security issued by a money market fund nor any dealer shall 
        offer or sell any such security to any person unless the 
        prospectus of the money market fund and any advertising or 
        sales literature for such fund prominently discloses, on the 
        first page of such prospectus or literature, the prohibition 
        against direct covered Federal assistance as described in 
        subsection (c).
          ``(2) Rules, regulations, and orders.--The Commission may, 
        after consultation with and taking into account the views of 
        the Board of Governors of the Federal Reserve System, the 
        Federal Deposit Insurance Corporation, and the Department of 
        the Treasury, adopt rules and regulations and issue orders 
        consistent with the protection of investors, prescribing the 
        manner in which the disclosure under this subsection shall be 
        provided.
  ``(e) Continuing Obligation To Meet Requirements of This Title.--A 
company or series that makes an election under subsection (b)(1) shall 
remain subject to the provisions of this title and the rules and 
regulations of the Commission thereunder that would otherwise apply if 
those provisions do not conflict with the provisions of this 
section.''.

                          Purpose and Summary

    On May 3, 2017, Representative Keith Rothfus introduced 
H.R. 2319, the ``Consumer Financial Choice and Capital Markets 
Protection Act''. As modified by an amendment in the nature of 
a substitute, H.R. 2319 reverses portions of the U.S. 
Securities and Exchange Commission's (SEC or Commission) 2014 
rule on money market funds (MMFs). The legislation would allow 
MMFs, regardless of whether their investors are retail or 
institutional, to elect to use the stable Net Asset Value (NAV) 
approach instead of a floating NAV to calculate the price per 
share. Additionally, MMFs, either by making the election to use 
a stable NAV or through its board of directors, can choose not 
to be subject to the mandatory liquidity fee provision of the 
SEC's 2014 rule. The bill does not, however, address the 
discretion afforded to boards of MMFs under the SEC rule that 
allows MMFs to implement gates to limit redemptions in times of 
stress. Additionally, the bill contains certain prohibitions 
against the use of taxpayer dollars to bail-out MMFs and 
requires disclosure of the bail-out prohibition provisions, but 
the bill does not restrict the Federal Reserve's authority to 
implement a program or facility with broad-based eligibility 
established in unusual or exigent circumstances that may 
benefit MMFs.

                  Background and Need for Legislation

    The goal of H.R. 2319 is to address certain concerns raised 
by municipalities following the implementation of the 2014 
SEC's MMF rule, namely that certain municipalities might face 
increased funding costs through MMFs as a result of the rule 
and that prime and tax-exempt MMFs saw outflows of over $1 
trillion into government MMFs after the rule's adoption.
    MMFs were established first in the 1970s as a solution to 
the Federal Reserve's Regulation Q, which prohibited bank 
demand deposits from paying interest and capped the interest 
rate on other types of bank accounts at 5.25 percent. Since 
then, investors have used MMFs as a type of mutual fund that 
offers higher yields than cash held in a bank deposit account 
while still allowing investors to quickly withdraw their funds. 
By law, MMFs are required to maintain generally low-risk 
investments, such as government securities, certificates of 
deposit, commercial paper, or other highly liquid and low-risk 
securities. MMFs are typically categorized by those that invest 
primarily in government securities, tax-exempt municipal 
securities, or corporate debt securities (known as prime 
funds), with some funds intended for retail investors and 
others intended for institutional investors. Money markets are 
securities. The FDIC does not federally insure these products, 
so they do not have to adhere to reserve requirements imposed 
on federally insured depository institutions, which allows MMFs 
to pay investors higher yields. But the absence of deposit 
insurance can make MMFs vulnerable to panics and runs.
    Historically, MMFs attempted to keep their respective NAV 
at a constant $1.00 per share by utilizing the ``amortized 
cost'' method to value a portfolio of securities. Amortized 
cost is the book price of a security--i.e., the price a fund 
pays for a security, as adjusted over time for accounting 
changes in any discount or premium. In practice, maintaining a 
stable $1.00 NAV by utilizing this method can be difficult if a 
fund's investments perform poorly, in which case the NAV per 
share may fall below $1.00--the occurrence of which is known as 
``breaking the buck.''
    In September 2008, the oldest MMF in the United States--the 
Reserve Primary Fund--``broke the buck'' due in large part to 
holding large amounts of Lehman Brothers' commercial paper and 
was forced to suspend investor redemptions following Lehman 
Brothers' bankruptcy filing. When this happened, investors in 
other MMFs became concerned about the safety of their 
investments and began to withdraw money from these funds, 
causing the other fund managers to liquidate assets to meet 
these redemption requests. No other MMFs ``broke the buck'' but 
some holding companies or ``parents'' of MMFs provided their 
funds with assistance to meet redemptions. To stem this run on 
MMFs, the U.S. Treasury Department announced that it would 
``guarantee the share price of any publicly offered eligible 
money market mutual fund.'' Using the Exchange Stabilization 
Fund--an emergency reserve fund normally used for foreign 
exchange intervention--the Treasury provided an explicit 
government backstop to the $3 trillion MMF industry.
    In the aftermath of the crisis, the SEC adopted broad 
reforms in January 2010 to promote both the resilience and 
stability of MMFs in the SEC's words ``by tightening the 
maturity and credit quality standards and imposing new 
liquidity requirements''. The 2010 rules:
           required MMFs to have a minimum percentage 
        of their assets in highly liquid securities so that 
        those assets can be readily converted to cash to pay 
        redeeming shareholders;
           placed new limits on a money market fund's 
        ability to acquire lower quality (Second Tier) 
        securities;
           shortened the average maturity limits for 
        money market funds, which helps to limit the exposure 
        of funds to certain risks such as sudden interest rate 
        movements;
           required funds to hold sufficiently liquid 
        securities to meet foreseeable redemptions;
           required fund managers to examine the fund's 
        ability to maintain a stable net asset value per share 
        in the event of shocks--such as interest rate changes, 
        higher redemptions, and changes in credit quality of 
        the portfolio;
           limited a money market fund's investment in 
        rated securities to those securities rated in the top 
        two rating categories (or unrated securities of 
        comparable quality);
           required money market funds to perform an 
        independent credit analysis of every security 
        purchased. As such, the credit rating serves as a 
        screen on credit quality, but can never be the sole 
        factor in determining whether a security is appropriate 
        for a money market fund;
           required money market funds each month to 
        post on their Web sites their portfolio holdings;
           required money market funds each month to 
        report to the Commission detailed portfolio schedules 
        in a format that can be used to create an interactive 
        database through which the Commission can better 
        oversee the activities of money market funds;
           require money market funds and their 
        administrators to be able to process purchases and 
        redemptions electronically at a price other than $1.00 
        per share. This requirement facilitates share 
        redemptions if a fund were to break the buck;
           permit a money market fund's board of 
        directors to suspend redemptions if the fund is about 
        to break the buck and decides to liquidate the fund; 
        and
           expanded the ability of affiliates of money 
        market funds to purchase distressed assets from funds 
        in order to protect a fund from losses.
    In addition, the 2010 rules improved the way that funds 
evaluate securities ratings provided by the Nationally 
Recognized Statistical Rating Organizations (NRSROs or credit 
rating agencies):
           required funds to designate each year at 
        least four NRSROs whose ratings the fund's board 
        considers to be reliable;
           eliminated the current requirement that 
        funds invest only in those asset backed securities that 
        have been rated by an NRSRO; and
           strengthened the requirements for allowing a 
        money market fund to ``look through'' the repurchase 
        issuer to the underlying collateral securities for 
        diversification purposes.
    The Treasury Department proposed in its Financial 
Regulatory Reform: A New Foundation (2009), that the 
President's Working Group on Financial Markets (PWG) prepare a 
report on fundamental changes needed to address systemic risk 
and to reduce the susceptibility of MMFs to runs. In October 
2010, the President's Working Group on Financial Markets issued 
a report on MMF reform in light of the Reserve Primary Fund's 
collapse and its effect on the financial system. The 
President's Working Group presented several policy options for 
further reforming MMFs, which included requiring MMFs to float 
their NAV. At the time, the former SEC Chairman noted that the 
2010 rules were a ``first step'' to strengthen MMFs. On 
November 13, 2012, the Financial Stability Oversight Council 
(FSOC) voted unanimously to advance proposed recommendations 
for reform for public comment. Using its authority under 
Section 120 of the Dodd-Frank Act, the FSOC proposed several 
alternatives for structural reforms to address the risks posed 
by MMFs. The FSOC sought comment on the proposed 
recommendations for structural reforms of MMFs ``that reduce 
the risk of runs and significant problems spreading through the 
financial system stemming from the practices and activities 
associated with MMFs.''
    Rather than allow the FSOC to dictate capital market 
standards, on July 23, 2014, the SEC approved a second package 
of rules governing money market funds. The 2014 rule requires 
institutional prime and institutional municipal MMFs to adopt 
market-based pricing by floating their NAV. Meanwhile, 
government and retail MMFs are permitted to continue using the 
amortized cost method of seeking to maintain a stable share 
price. The SEC's 2014 final rule also authorized the boards of 
MMFs to impose liquidity fees and redemption gates during 
periods of stress, and under certain circumstances, requires 
liquidity fees to be imposed. The SEC's rule became effective 
on October 14, 2016. At the time of adoption, Robert Pozen, a 
senior fellow at the Brookings Institution, noted that ``the 
new rules are likely to reduce the chances of runs on money 
market funds in times of financial crisis. But it remains to be 
seen whether these tougher requirements will diminish the 
appeal of the funds relative to bank deposits for short-term 
investors.''
    Not everyone who was involved with the SEC's final rule 
agreed that it would reduce the likelihood of runs on money 
market funds. Former Commissioner Michael Piwowar, when 
dissenting from the SEC rule, said: ``While the floating NAV 
will not stop runs, it will impose costs on money market funds 
that will ultimately be borne by its shareholders in the form 
of higher fees and expenses, and lower returns.''
    However, then-SEC Commissioner Dan Gallagher supported the 
final rule and observed that the SEC cannot bail out any firm 
or product and that oversight of products should be focused on 
market-based valuations and capital standards. Former 
Commissioner Gallagher also said:

        [The floating NAV] eliminates the first-mover `put' 
        advantage that favors sophisticated institutional 
        investors at the expense of retail investors, leaving 
        the latter holding the proverbial bag. Just as 
        importantly, in my view, today's floating NAV reforms 
        clarify for the investors the risks associated with 
        investing in money market mutual funds while making it 
        clear to the markets and to policymakers that these 
        financial instruments are not bank products to be 
        overseen by prudential regulators, but rather 
        investment products properly regulated by the SEC.

    By setting October 14, 2016, as the date these new 
regulations would go into effect, the SEC provided MMFs two 
years to modify their business models and comply with the new 
rule. According to October 2017 statistics from the SEC's 
Division of Investment Management, leading up to implementation 
of these reforms, prime and tax-exempt MMFs did experience a 
decrease in assets of $1 trillion, with government MMFs seeing 
an increase in assets of $968 billion during the same period. 
According to the SEC, during this period, some short-term rates 
increased, though these rate increases have since dissipated. 
The SEC anticipated this reallocation of assets from prime to 
government MMFs and potential effects on yields in the short-
run in the rule's 2014 adopting release but determined that the 
goals of the rulemaking justified the reforms, despite the 
costs. According to the SEC, since the MMF reforms were 
implemented, investor fund reallocations have not significantly 
changed, with assets in both government and prime MMFs largely 
stabilizing. The time period since the compliance date of the 
reforms has also coincided with a rising interest rate 
environment, with the Federal Reserve raising short-term 
interest rates several times over the last year, which has 
resulted in yield increases for MMFs.
    On September 14, 2017, Capital Markets, Securities, and 
Investment Subcommittee Chairman Huizenga (R-MI) and Ranking 
Member Maloney (D-NY) sent a letter to SEC Chairman Jay Clayton 
asking for the SEC's analysis of the impact of the 2014 money 
market reforms since they went into effect in October 2016, as 
well as the effects that would occur if the SEC were to reverse 
the rule requiring prime and municipal MMFs to float their 
NAVs. On October 5, 2017, Chairman Clayton responded that 
``[i]t is difficult at this time to predict what the impact on 
prime and municipal funds would be if the Commission were to 
permit them again to use a stable $1.00 NAV'' and expressed 
concern ``that making major changes at this time could be 
disruptive to the short-term funding markets.'' Chairman 
Clayton also noted that ``the Commission and its staff are 
monitoring the short-term funding markets and MMFs' activities 
generally, and will remain focused on the role MMFs play for 
investors and the short-term markets.'' At a hearing before the 
House Financial Services Committee on October 4, 2017, Rep. 
David Scott (D-GA) asked Chairman Clayton about his thoughts on 
the implemented MMF reforms, Chairman Clayton offered a similar 
response, saying: ``Our Department of Economic Research is 
looking at it. And so I think--I think it's too early to say 
we're wrong.'' In the U.S. Treasury Department's Core 
Principles Report on asset management and insurance released on 
October 26, 2017, Treasury included a section that explained 
the SEC's 2014 MMF reforms but the report did not make any 
policy recommendations.
    Nonetheless, proponents of the legislation believe that 
further delays to reverse portions of the 2014 MMF rules will 
continue to unduly impose costs on municipalities and will 
further affect the ability for prime funds to operate more 
efficiently for investors. At a November 3, 2017 Capital 
Markets subcommittee hearing, Patrick McCoy, President of the 
Government Finance Officers Association, testified that 
``[s]tate and local governments access the capital markets and 
issue short term debt for a variety of reasons. This important 
legislation would allow governments to continue this access 
without increasing costs for taxpayers.'' Additionally, 
proponents assert that with other reforms the SEC has already 
implemented, investors can more accurately evaluate the risks 
that were overlooked leading up to the financial crisis of 
investing in MMFs.

                                Hearings

    The Committee on Financial Services held a hearing 
examining matters relating to H.R. 2319 on November 3, 2017.

                        Committee Consideration

    The Committee on Financial Services met in open session on 
January 17, 2018, and January 18, 2018, and ordered H.R. 2319 
to be reported favorably to the House as amended by a recorded 
vote of 34 yeas to 21 nays (recorded vote no. FC-145), a quorum 
being present. Before the motion to report was offered, the 
Committee adopted an amendment in the nature of a substitute 
offered by Mr. Rothfus by voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto. The 
sole recorded vote was on a motion by Chairman Hensarling to 
report the bill favorably to the House as amended. The motion 
was agreed to by a recorded vote of 34 yeas to 21 nays (Record 
vote no. FC-145), a quorum being present.


                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the findings and recommendations of 
the Committee based on oversight activities under clause 
2(b)(1) of rule X of the Rules of the House of Representatives, 
are incorporated in the descriptive portions of this report.

                    Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, June 8, 2018.
Hon. Jeb Hensarling,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2319, the Consumer 
Financial Choice and Capital Markets Protection Act of 2017.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                             Mark P. Hadley
                                         (For Keith Hall, Director)
    Enclosure.

H.R. 2319--Consumer Financial Choice and Capital Markets Protection Act 
        of 2017

    Under current law, money market mutual funds are generally 
required to show the floating net asset value for their shares, 
that is, the share price must fluctuate with changes in the 
market value of the fund's assets. Those funds also are 
required to round their share prices to the fourth decimal 
place and to impose liquidity fees or suspend redemptions 
temporarily if the fund's liquid assets falls below 10 percent 
of its total assets.
    H.R. 2319 would allow money market mutual funds to use 
alternate methods of valuation for their shares and to round 
those prices to the second decimal place. The bill also would 
remove the requirement for money market funds to impose 
liquidity fees.
    Using information from the Securities Exchange Commission 
(SEC), CBO estimates that implementing H.R. 2319 would cost $1 
million over the 2019-2023 period for the agency to update its 
rules and to monitor money market funds that use alternate 
valuation methods. However, the SEC is authorized to collect 
fees sufficient to offset its annual appropriation; therefore, 
assuming appropriation actions consistent with that authority, 
CBO estimates that the net effect on discretionary spending 
would be negligible.
    Enacting H.R. 2319 would not affect direct spending or 
revenues; therefore, pay-as-you-go procedures do not apply.
    CBO estimates that enacting H.R. 2319 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    H.R. 2319 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA).
    The bill would impose a private-sector mandate on principal 
underwriters and dealers of securities issued by money market 
funds by requiring those entities to disclose that there is a 
prohibition against direct federal assistance for those money 
market funds. The disclosure would need to be included in the 
prospectus or literature of the security being sold. Using 
information from the SEC about the costs of complying with 
current disclosure requirements, CBO estimates that the 
incremental costs of the mandate would be small and would fall 
well below the annual threshold for private-sector mandates 
established in UMRA ($156 million in 2017, adjusted annually 
for inflation).
    The CBO staff contact for this estimate is Stephen Rabent. 
The estimate was reviewed by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995.
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                    Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

                   Disclosure of Directed Rulemaking

    Pursuant to section 3(i) of H. Res. 5, (115th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires no 
directed rule makings within the meaning of such section.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This Section cites H.R. 2319 as the ``Consumer Financial 
Choice and Capital Markets Protection Act''

Section 2. Treatment of money market funds under the Investment Company 
        Act of 1940

    This section amends the Investment Company Act of 1940 to 
allow MMFs to elect to use the stable NAV approach to calculate 
price per share. Additionally those MMFs that do elect to use 
the stable NAV approach are exempted from the mandatory 
liquidity fee provision of the 2014 SEC rule so long as they 
comply with certain requirements. This section also provides 
certain prohibitions against the use of taxpayer funds to bail 
out MMFs.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, and existing law in which no 
change is proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic):

                     INVESTMENT COMPANY ACT OF 1940



           *       *       *       *       *       *       *
SEC. 66. MONEY MARKET FUNDS.

  (a) Definitions.--In this section--
          (1) the term ``covered Federal assistance'' means 
        Federal assistance used for the purpose of--
                  (A) making any loan to, or purchasing any 
                stock, equity interest, or debt obligation of, 
                any money market fund;
                  (B) guaranteeing any loan or debt issuance of 
                any money market fund; or
                  (C) entering into any assistance arrangement 
                (including tax breaks), loss sharing, or profit 
                sharing with any money market fund; and
          (2) the term ``Federal assistance'' means--
                  (A) insurance or guarantees by the Federal 
                Deposit Insurance Corporation;
                  (B) transactions involving the Secretary of 
                the Treasury; or
                  (C) the use of any advances from any Federal 
                Reserve credit facility or discount window, 
                except to the extent any part of a program or 
                facility with broad-based eligibility 
                established in unusual or exigent circumstances 
                might be made available.
  (b) Election To Be a Stable Value Money Market Fund.--
          (1) In general.--Notwithstanding any other provision 
        of this title, any open-end investment company (or a 
        separate series thereof) that is a money market fund 
        that relies on section 270.2a-7 of title 17, Code of 
        Federal Regulations, may, in the prospectus included in 
        its registration statement filed under section 8, state 
        that the company or series has elected to compute the 
        current price per share, for purposes of distribution 
        or redemption and repurchase, of any redeemable 
        security issued by the company or series by using the 
        amortized cost method of valuation, or the penny-
        rounding method of pricing, regardless of whether its 
        shareholders are limited to natural persons, if--
                  (A) the company or series has as its 
                objective the generation of income and 
                preservation of capital through investment in 
                short-term, high-quality debt securities;
                  (B) the board of directors of the company or 
                series elects, on behalf of the company or 
                series, to maintain a stable net asset value 
                per share or stable price per share, by using 
                the amortized cost valuation method, as defined 
                in section 270.2a-7(a) of title 17, Code of 
                Federal Regulations (or successor regulation), 
                or the penny-rounding pricing method, as 
                defined in section 270.2a-7(a) of title 17, 
                Code of Federal Regulations (or successor 
                regulation), and the board of directors of the 
                company has determined, in good faith, that--
                          (i) it is in the best interests of 
                        the company or series, and its 
                        shareholders, to do so; and
                          (ii) the money market fund will 
                        continue to use such method or methods 
                        only as long as the board of directors 
                        believes that the resulting share price 
                        fairly reflects the market-based net 
                        asset value per share of the company or 
                        series; and
                  (C) the company or series will comply with 
                such quality, maturity, diversification, 
                liquidity, and other requirements, including 
                related procedural and recordkeeping 
                requirements, as the Commission, by rule or 
                regulation or order, may prescribe or has 
                prescribed as necessary or appropriate in the 
                public interest or for the protection of 
                investors to the extent that such requirements 
                and provisions are not inconsistent with this 
                section.
          (2) Exemption from default liquidity fee 
        requirements.--
                  (A) Elections under paragraph (1).--
                Notwithstanding section 270.2a-7 of title 17, 
                Code of Federal Regulations (or successor 
                regulation), no company or series that makes 
                the election under paragraph (1) shall be 
                subject to the default liquidity fee 
                requirements of section 270.2a-7(c)(2)(ii) of 
                title 17, Code of Federal Regulations (or 
                successor regulation) unless the board of 
                directors of such company or series elects, in 
                the prospectus included in the registration 
                statement filed under section 8, to be subject 
                to such requirements.
                  (B) Other funds.--Notwithstanding section 
                270.2a-7 of title 17, Code of Federal 
                Regulations (or successor regulation), a 
                company or series that does not make an 
                election under paragraph (1) shall not be 
                subject to the default liquidity fee 
                requirements of section 270.2a-7(c)(2)(ii) of 
                title 17, Code of Federal Regulations (or 
                successor regulation), if it states in the 
                prospectus included in the registration 
                statement filed under section 8, that the 
                company or series satisfies the provisions of 
                subparagraphs (A) and (C) of paragraph (1) and 
                that the board of directors of such company or 
                series has elected for the company or series to 
                not be subject to the default liquidity fee 
                requirements.
  (c) Prohibition Against Federal Government Bailouts of Money 
Market Funds.--Notwithstanding any other provision of law 
(including regulations), covered Federal assistance may not be 
provided directly to any money market fund.
  (d) Disclosure of the Prohibition Against Federal Government 
Bailouts of Money Market Funds.--
          (1) In general.--No principal underwriter of a 
        redeemable security issued by a money market fund nor 
        any dealer shall offer or sell any such security to any 
        person unless the prospectus of the money market fund 
        and any advertising or sales literature for such fund 
        prominently discloses, on the first page of such 
        prospectus or literature, the prohibition against 
        direct covered Federal assistance as described in 
        subsection (c).
          (2) Rules, regulations, and orders.--The Commission 
        may, after consultation with and taking into account 
        the views of the Board of Governors of the Federal 
        Reserve System, the Federal Deposit Insurance 
        Corporation, and the Department of the Treasury, adopt 
        rules and regulations and issue orders consistent with 
        the protection of investors, prescribing the manner in 
        which the disclosure under this subsection shall be 
        provided.
  (e) Continuing Obligation To Meet Requirements of This 
Title.--A company or series that makes an election under 
subsection (b)(1) shall remain subject to the provisions of 
this title and the rules and regulations of the Commission 
thereunder that would otherwise apply if those provisions do 
not conflict with the provisions of this section.

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