House Financial Services Chair Jeb Hensarling issued a proposed re-do of the six-year-old Dodd-Frank Act Tuesday that gives and takes away from investment advisors and retail investors.

With the temperatures of U.S. House, Senate and presidential campaigns rising and the number of days Congress is in session dwindling, the chances that any of the proposals will make it into law are virtually non-existent. But if Republicans maintain control of the House or the Senate, the plan could be a starting point for legislation next year.  

For advisors, the Hensarling proposals give them the right to remove enforcement proceedings from Securities and Exchange Commission administrative law judges and place them in the hands of the federal courts.

It also gives them a potential break from some new SEC rules because the agency and all other federal financial regulators would have to conduct detailed cost-benefit analyses for all proposed regulations.

In another "give" (which would also be a “give” to consumers who would end up winners rather than losers with new places to put their money), the legislation would expand the pool of accredited investors, which in turn would expand the number of clients to which advisors could offer private funds.

In a take-away for advisors (which would be a give to retail investors), the maximum criminal fines would be increased for individuals and firms for insider trading and other corrupt practices.

For the first time, the SEC would be allowed to impose fines equal to investor losses.

But this expanded ability to protect consumers would be limited to cases involving fraud, deceit, manipulation, or deliberate or reckless disregard of a regulatory requirement where the loss or risk of loss is significant.

Hensarling claimed the law would impose the toughest penalties in history for financial fraud, self-dealing and deception, penalties he called a key to economic growth.

In a take-away for retail investors (which is a “give” for investment advisors), the SEC would be barred from restricting or barring provisions in contracts with investors that require them to settle disputes in arbitration and prevents them from taking grievances to court.

For the advisor and the broker-dealer community, the potential emasculating of the SEC’s administrative law judge system could be a removal of a major sore point with the regulator.

The SEC has been accused of stacking the deck against defendants by bringing many cases before their hand-picked administrative judges who have ruled 90 percent of the time in favor of the agency.

The regulator, in turn, has argued the administrative process is fair and helps get victims compensated sooner.

Under provisions of the proposed law outside of the SEC that are directly related to consumers and advisors, the Consumer Financial Protection Bureau would be renamed the Consumer Financial Opportunity Commission, adding promoting competitive markets to its existing duty of taking measures to protect consumers.

The agency would be stripped of its authority to ban bank products and services it deems abusive including loans, bank accounts and credit cards.

The CFPB has long been a target of Hensarling who has defended payday lenders and other financial service providers that consumer advocates have accused as being predatory.

It is likely the CFPB is a major reason why Hensarling has called his proposal the Financial CHOICE Act (CHOICE standing for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs).

A text of the bill has not been released.

In a proposal in the package, huge asset management firms would no longer have to worry about the possibility of being faced with increased capital and other stiffened regulatory requirements because the ability of the Financial Stability Oversight Council to label any financial institution as “systemically important” would be removed.

The Volcker Rule, restricting the ability of financial institutions to trade for their own accounts, would be repealed.

In introducing the proposals, House Financial Services Chair Texas Republican Hensarling called Dodd Frank “a grave mistake that has failed,” claiming it has resulted in the occupation of the capital markets by federal regulators.