Lummis Applauds House Committee Passage of Bipartisan, Bicameral Effort to Overturn SEC’s SAB 121 Rule

March 8, 2024

WASHINGTON, D.C.— U.S. Senator Cynthia Lummis (R-WY) applauded the House Financial Services Committee’s passage of the bipartisan, bicameral Congressional Review Act resolution to overturn the U.S. Securities and Exchange Commission’s (SEC) Staff Accounting Bulletin (SAB) 121 rule. 

“SAB 121 has the potential to shake the foundation of essential custody services and increase bankruptcy risks for consumers,” said Lummis. “Before the SEC issued a legally binding directive with widespread implications, it should have solicited feedback from federal banking regulators and the public. This passage out of committee brings us one step closer to reining in the Biden administration’s out of control SEC and protecting Americans’ hard-earned financial assets.” 

Earlier this month, Senator Lummis led her colleagues in introducing this resolution after the Government Accountability Office (GAO) confirmed in its October 31, 2023, decision that SAB 121 has legal effect relating to public companies, including banks and trust companies, that have capital requirements tied to accounting standards. The GAO’s decision also underscores that the SEC should have sought public comment prior to issuing this legal requirement. 

SAB 121 has serious implications for consumers and banks by confusing the distinction between customer assets and bank assets, threatening the foundation of essential custody services and increasing bankruptcy risk for consumers. Reps. Wiley Nickel (D-NC) and Mike Flood (R-NE) introduced the House version of the CRA resolution.

“Thank you to my colleagues on the committee for advancing the repeal of SAB 121 on a bipartisan basis,” said Rep. Flood. “The SEC issued SAB 121 without conferring with prudential regulators despite the accounting standard’s effects on financial institutions’ treatment of custodial assets, and the SEC issued SAB 121 without going through the notice-and-comment process. In the face of overreach by a regulator, it is the role of Congress to serve as a check. Today’s vote was a key step in rolling back SAB 121, and I look forward to a vote by the full House so we can end SAB 121.”

“Today, Democrats and Republicans on the House Financial Services Committee took an important step to rescind the SEC’s Staff Accounting Bulletin No. 121,” said Rep. Nickel. “SAB 121 prevents well-regulated banks from safeguarding digital assets, making the industry less safe for consumers. It’s past time for us to take action to protect investors and the financial system, encourage innovation, bolster American competitiveness, and restore the role of Congress in the administrative rulemaking process. I thank my colleagues on both sides of the aisle for joining this bipartisan initiative I’m leading with Congressman Flood and look forward to advancing it through the House.”

In November, Lummis, Nickel and Flood sent a letter alongside Sen. Kirsten Gillibrand (D-NY) and Reps. Patrick McHenry (R-NC), French Hill (R-AR) and Ritchie Torres (D-NY) to the Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Currency and the National Credit Union Administration (prudential regulators) urging them to clarify that SAB 121 is not enforceable after the GAO found that it is a rule for purposes of the Congressional Review Act

In March 2023, Lummis and McHenry sent a letter to the prudential regulators seeking clarification on SAB 121. 

For text of the CRA, click here.