Velázquez on Dodd-Frank Bill, Puerto Rico Protections
Washington, DC – Rep. Nydia M. Velázquez (D-NY) commented today on S.2155, a bill that would roll back many elements of the Dodd-Frank Act. While Velázquez opposes S.2155 overall, she noted she was pleased the bill includes her legislation, the U.S. Territories Investor Protection Act.
The U.S. Territories Investor Protection Act would extend key protections of the Investment Company Act of 1940 to investment companies operating in Puerto Rico and all U.S. territories. Some entities in Puerto Rico have used a loophole in the current law to act as an underwriter for the issuance of bonds, while simultaneously repackaging those same bonds into mutual funds they sold exclusively to investors on the island. Although this type of arrangement is legal in Puerto Rico due to an exemption in the 1940 Company Act, it would be prohibited on the U.S. mainland as a conflict of interest. Velázquez introduced her bill to close this loophole in 2015 and has been pushing for its enactment ever since. Her full statement is below.
“I was closely involved when Congress crafted the Dodd-Frank Act, which has brought needed accountability to financial institutions and protected our economy and consumers against unfair and unsound practices and products.
“The bill being debated in the House today will undermine many of these protections. Notably, it takes aim at provisions that prevent discrimination against minorities in mortgage lending markets. By raising the threshold for what is considered systemically important from $50 billion in assets to $250 billion, the bill lets 25 of the nation’s largest banks escape necessary regulatory oversight and monitoring. On balance, these are poor choices that, in my view, heighten the risk of improper financial activities similar to those that precipitated 2008 financial crisis. I will vote no.
“It is a somewhat ironic, but positive, silver lining that S.2155, which I cannot support, contains provisions I personally authored to prevent the residents of Puerto Rico from being preyed on by unscrupulous actors. This bill will put Puerto Rico’s mutual fund industry in regulatory parity with the Mainland and, at last, bring to an end decades of exploitation of Puerto Rican investors. I am heartened, at least, that by passing my legislation, as part of this larger package, we will no longer hear of the people of Puerto Rico being swindled out of their nest egg due to an antiquated loophole in federal investment law.
“Going forward, I will seek to reverse the negative components of S.2155. We must not go back to the bad old days when inadequate regulations meant consumer exploitation and unsound speculation.”