Investment Company Institute Calls for Modernization of the Dodd-Frank Act Ahead of Its 15-Year Anniversary
Investment Company Institute Advocates for Dodd-Frank Act Update
As the Dodd-Frank Wall Street Reform and Consumer Protection Act marks its 15th anniversary, the Investment Company Institute (ICI) has taken significant steps to advocate for necessary updates to the legislation. Tom Quaadman, ICI’s Chief Government Affairs and Public Policy Officer, addressed the House Financial Services Committee in a recent testimony, highlighting both the achievements and shortcomings of the Act since its inception.
A Brief History of Dodd-Frank Act
The Dodd-Frank Act was enacted in the aftermath of the 2008 financial crisis, aiming to create a more stable and transparent financial system. It introduced critical regulations intended to protect consumers and investors while promoting more efficient markets. However, over the last 15 years, the financial landscape has evolved significantly, and many challenges that pose risks to investors were not anticipated when the legislation was drafted.
The Need for Change
In his testimony, Quaadman emphasized the resilience of the U.S. financial system over the past decade and a half, noting that while there have been advancements, numerous current issues remain unaddressed by the existing framework. He warned that the obstacles now faced by Americans trying to secure their financial futures stem in part from the limitations of the Dodd-Frank Act. Quaadman presented various recommendations for modernizing the Act to better equip investors for the challenges of today’s markets.
Key Recommendations from ICI
1. Restore SIFI Designation Guidance
Quaadman underscored the importance of restoring the Financial Stability Oversight Council’s (FSOC) 2019 guidance regarding the Systemically Important Financial Institution (SIFI) designation. He argued that stakeholders require clarity and predictability from FSOC in its approach, particularly when utilizing its authority to designate SIFIs.
2. Support the FSOC Improvement Act of 2025
Another critical recommendation was to pass the FSOC Improvement Act of 2025. This proposed legislation would mandate that the FSOC evaluate activity-based regulation or alternative measures as potential solutions to risks before deciding on a SIFI designation. It is significant that previous versions of this bill received strong bipartisan support in the House, signaling a collaborative effort to enhance financial stability.
3. Expand Retail Investor Access to Private Markets
Quaadman called for concrete measures to broaden retail investors' access to private markets. Key suggestions include removing the current 15% limit on alternative investments by retail-focused closed-end funds and updating the co-investment rules for regulated funds. Furthermore, he advocated for increasing the availability of private market strategies within retirement plans like 401(k)s.
Conclusion
Quaadman concluded his testimony with a reminder: the regulatory landscape must adapt to keep pace with a rapidly changing market environment. The ICI is prepared to collaborate with Congress and financial regulators to foster a more modern and accessible regulatory framework beneficial to American investors. As we look to the future, the stakes for both investors and the overall economy make it clear that an updated Dodd-Frank Act is no longer a choice but a necessity.
This testimony not only serves as a poignant reflection on past regulatory efforts but also as a call to action for policymakers. By embracing thoughtful reforms, we can ensure that the financial system operates effectively, safeguarding the interests of individual investors for years to come.