IB 
Union Calendar No. 462 
114TH CONGRESS 
2D SESSION 
H. R. 4166 
[Report No. 114–596] 
To amend the Securities Exchange Act of 1934 to provide specific credit 
risk retention requirements to certain qualifying collateralized loan obligations. 
IN THE HOUSE OF REPRESENTATIVES 
DECEMBER 3, 2015 
Mr. BARR (for himself and Mr. DAVID SCOTT of Georgia) introduced the 
following bill; which was referred to the Committee on Financial Services 
MAY 26, 2016 
Additional sponsors: Mr. FOSTER, Mr. GUINTA, Mr. HUIZENGA of Michigan, 
Mrs. WAGNER, Mr. MARCHANT, Mr. STIVERS, Mr. MCHENRY, Mr. 
FITZPATRICK, Mr. LUETKEMEYER, Mr. CARNEY, and Mr. HILL 
MAY 26, 2016 
Reported with an amendment, committed to the Committee of the Whole 
House on the State of the Union, and ordered to be printed 
[Strike out all after the enacting clause and insert the part printed in italic] 
[For text of introduced bill, see copy of bill as introduced on December 3, 2015] 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6652
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
A BILL 
To amend the Securities Exchange Act of 1934 to provide 
specific credit risk retention requirements to certain 
qualifying collateralized loan obligations. 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6652
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Expanding Proven Fi-
nancing for American Employers Act’’. 
SEC. 2. RISK RETENTION REQUIREMENT FOR QUALIFIED 
COLLATERALIZED LOAN OBLIGATIONS. 
Section 15G(e) of the Securities Exchange Act of 1934 
(15 U.S.C. 780–11(e)) is amended by inserting after para-
graph (6) the following new paragraphs: 
‘‘(7) 
REQUIREMENTS
FOR
QUALIFIED 
COLLATERALIZED LOAN OBLIGATIONS.— 
‘‘(A) RISK
RETENTION
REQUIREMENT.— 
Notwithstanding any other provision of this sec-
tion, as of the effective date set forth in sub-
section (i)(2), the risk retention requirement for 
qualified collateralized loan obligations may be 
met by the purchase and, during the applicable 
duration of risk retention specified by the rules 
of the Federal banking agencies under subsection 
(c)(1)(C)(ii), holding (without hedging or other-
wise transferring the credit risk), of the value of 
no less than five percent of the equity distributed 
among each of the higher tranches of the issuance 
with no less than 3.5 percent retained as equity 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
of the collateralized loan obligation by the man-
ager of the qualified collateralized loan obliga-
tion or one or more of the majority-owned affili-
ates of the manager or its knowledgeable employ-
ees and other employees. 
‘‘(B) QUALIFIED
COLLATERALIZED
LOAN 
OBLIGATIONS.—For purposes of this paragraph, 
a qualified collateralized loan obligation is a 
collateralized loan obligation that meets all of the 
following requirements: 
‘‘(i) ASSET QUALITY PROTECTIONS.— 
The collateralized loan obligation shall— 
‘‘(I) have at least 100 percent of 
its assets comprised of senior secured 
loans and cash equivalents; 
‘‘(II) have 100 percent of its loan 
assets issued by companies; 
‘‘(III) have no assets that are 
asset-backed securities or derivatives, 
except that this limitation shall not 
prohibit a qualified collateralized loan 
obligation from acquiring a loan par-
ticipation or any interest related to or 
in a letter of credit, or entering into 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
derivative transactions to hedge inter-
est rate or currency rate mismatches; 
‘‘(IV) not purchase assets in de-
fault, margin stock, or equity convert-
ible securities; 
‘‘(V) acquire only loans held or 
acquired by three or more investors or 
lenders unaffiliated with the manager; 
‘‘(VI) hold only loans to borrowers 
whose financial statements are subject 
to an annual audit from an inde-
pendent, accredited accounting firm; 
‘‘(VII) have no more than 60 per-
cent of its assets comprised of covenant 
lite loans, except that each asset shall 
require the disclosure of unaudited fi-
nancial statements quarterly within 45 
days of the end of the quarter and au-
dited financial statements annually 
within 90 days of the end of the fiscal 
year; and 
‘‘(VIII) at the time of purchase of 
any asset, comply with the require-
ments of subclauses (I) and (VII) and 
clause (ii) of this subparagraph, or, if 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00005
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
not in compliance with any such re-
quirement, maintain or improve the 
level of compliance after giving effect to 
such purchase. 
‘‘(ii) 
ASSET
PORTFOLIO
PROTEC-
TIONS.— 
‘‘(I) No more than 3.5 percent of 
the assets of the collateralized loan obli-
gation may relate to any single bor-
rower. 
‘‘(II) No more than 15 percent of 
the assets of the collateralized loan obli-
gation may relate to any single indus-
try. 
‘‘(iii) STRUCTURAL PROTECTIONS.— 
‘‘(I) The collateralized loan obli-
gation’s equity shall be at least 8 per-
cent of the value of its assets. 
‘‘(II) The governing transaction 
documents of the collateralized loan ob-
ligation specify over-collateralization 
and interest coverage tests, and if any 
such test falls below the required level 
specified for the collateralized loan ob-
ligation in such documents, available 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00006
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
interest collections (and if necessary, 
available principal collections) must be 
applied to repay the collateralized loan 
obligation’s debt in order of seniority 
until compliance with the applicable 
test is restored. 
‘‘(iv) 
REQUIREMENT
TO
MAINTAIN 
ALIGNMENT OF MANAGER AND INVESTOR IN-
TERESTS.— 
‘‘(I) The collateralized loan obli-
gation shall be an open market 
collateralized loan obligation. 
‘‘(II) The holders of the equity of 
the collateralized loan obligation (ex-
cluding the risk retention equity held 
as required by subparagraph (A)) shall 
have the right to remove by vote the 
manager for cause. 
‘‘(III) A majority of the man-
ager’s fees, including any incentive fee, 
shall be subordinated to payments then 
due in relation to the collateralized 
loan obligation’s debt securities. 
‘‘(IV) 
The 
manager’s 
discre-
tionary sales of assets on behalf of the 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00007
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
issuer of the collateralized loan obliga-
tion shall be limited each year to not 
more than 30 percent of the principal 
amount 
of 
the 
assets 
of 
the 
collateralized loan obligation (other 
than sales of defaulted or credit-dete-
riorated, credit-risk, or credit-improved 
loans). 
‘‘(V) The risk retention equity re-
quirement set forth in subparagraph 
(A) is met. 
‘‘(VI) All holders of collateralized 
loan obligation securities that are U.S. 
persons within the meaning of Regula-
tion S (17 C.F.R. 230; 249) under the 
Securities Act of 1933, are qualified 
investors. 
‘‘(v) REGULATORY
OVERSIGHT
RE-
QUIREMENTS.— 
‘‘(I) 
The 
manager 
of 
the 
collateralized loan obligation shall be 
registered with the Commission as an 
investment adviser under section 203 
of the Investment Advisers Act of 1940 
(15 U.S.C. 80b–3). 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00008
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
‘‘(II) All purchases and sales of 
the assets of the collateralized loan obli-
gation shall be conducted on an arm’s- 
length basis and in compliance with 
any applicable provisions of the Invest-
ment Advisers Act of 1940. 
‘‘(vi) REQUIREMENTS
RELATING
TO 
TRANSPARENCY
AND
DISCLOSURE.—A 
monthly report shall be made available to 
holders of debt securities of the collateralized 
loan obligation, which includes information 
regarding— 
‘‘(I) a list of assets of the 
collateralized loan obligation, includ-
ing, with respect to each asset, the obli-
gor name; the CUSIP (or security 
identifier) if applicable, the interest 
rate and maturity date, the type of 
asset, and the market price for each 
asset where available; 
‘‘(II) with respect to the portfolio 
of assets, the aggregate principal bal-
ance and aggregate adjusted collateral 
principal amount (adjusted as required 
by the collateralized loan obligation 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00009
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
governing transaction documents) and 
the percentage of such aggregate ad-
justed collateral principal represented 
by each asset; 
‘‘(III) information relating to 
each applicable over-collateralization 
test and interest coverage test and the 
level of compliance in relation to each 
test; 
‘‘(IV) all purchases, repayments, 
and sales of assets; and 
‘‘(V) the identity of each defaulted 
asset as defined in the related trans-
action documents. 
‘‘(8) DEFINITIONS
FOR
PURPOSES
OF
PARA-
GRAPH (7).—For purposes of paragraph (7), the fol-
lowing definitions apply: 
‘‘(A) BALANCE
SHEET
COLLATERALIZED 
LOAN
OBLIGATION.—The term ‘balance sheet 
collateralized 
loan 
obligation’ 
means 
a 
collateralized loan obligation— 
‘‘(i) whose assets consist predominantly 
of loans originated and transferred to the 
collateralized loan obligation by one or 
more of its affiliates other than in— 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00010
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
‘‘(I) open market transactions; 
‘‘(II) 
from 
an 
open 
market 
collateralized loan obligation; or 
‘‘(III) from a collateralized loan 
obligation in existence as of the effec-
tive date of this paragraph that is not 
a balance sheet collateralized loan obli-
gation; and 
‘‘(ii) the assets and liabilities of which 
are, immediately after issuance of its asset- 
backed securities in a securitization trans-
action, included under generally accepted 
accounting principles in the consolidated 
balance sheet of one or more of its affiliates. 
‘‘(B) 
COLLATERALIZED
LOAN
OBLIGA-
TION.—The term ‘collateralized loan obligation’ 
means any issuing entity of an asset-backed se-
curity, as defined in section 3(a)(79) of the Secu-
rities Exchange Act of 1934 (15 U.S.C. 
78c(a)(79)), that is comprised primarily of com-
mercial loans. 
‘‘(C) COVENANT LITE LOAN.—The term ‘cov-
enant lite loan’ means, at the time the 
collateralized loan obligation enters into a com-
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00011
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
mitment to acquire such loan, a loan for which 
the underlying instruments neither— 
‘‘(i) require the obligor to comply with 
any maintenance covenant; nor 
‘‘(ii) contain a cross-default provision 
to a financing facility of the obligor that re-
quires the obligor to comply with a mainte-
nance covenant (including one that may 
apply only upon the funding of such other 
loan or financing facility); except that if 
such loan is pari passu with another loan 
of the obligor that would not be a covenant 
lite loan under the criteria in this clause, 
such loan shall be deemed not to be a cov-
enant lite loan. For purposes of this clause, 
the term ‘pari passu’ means treated equally 
and without preference. 
‘‘(D) EQUITY.—The term ‘equity’ means the 
most junior class of securities issued by the 
collateralized loan obligation (excluding any 
non-economic security such as the issuer’s com-
mon stock) and any additional class(es) of secu-
rities junior to the collateralized loan obliga-
tion’s debt securities. 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00012
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
‘‘(E) 
MANAGER.—The 
term 
‘manager’ 
means an investment manager that is respon-
sible for managing a collateralized loan obliga-
tion under the collateralized loan obligation’s 
governing transaction documents. 
‘‘(F) OPEN MARKET COLLATERALIZED LOAN 
OBLIGATION.—The 
term 
‘open 
market 
collateralized 
loan 
obligation’ 
means 
a 
collateralized loan obligation— 
‘‘(i) whose assets consist predominantly 
of senior, secured syndicated loans acquired 
by such collateralized loan obligation di-
rectly from the sellers thereof in an open 
market 
transaction 
or 
from 
another 
collateralized loan obligation and of tem-
porary investments; 
‘‘(ii) that is managed by a manager; 
and 
‘‘(iii) that is not a balance sheet 
collateralized loan obligation. 
‘‘(G) OPEN
MARKET
TRANSACTION.—The 
term ‘open market transaction’ means— 
‘‘(i) either an initial loan syndication 
transaction or a secondary market trans-
action in which a seller offers senior, se-
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00013
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
of Rule 144A under the Securities 
Act of 1933; 
‘‘(bb) a person (other than 
any rating organization rating 
the issuer’s securities) involved in 
the organization or operation of 
the issuer or an affiliate of such a 
person, as defined in Rule 405 
under the Securities Act of 1933; 
or 
‘‘(cc) any entity in which all 
of the equity owners are such 
qualified institutional buyers as 
described in item (aa) or persons 
described in item (bb).’’. 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00016
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00017
Fmt 6652
Sfmt 6203
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS
Union Calendar No. 462 
114TH CONGRESS 
2D SESSION 
H. R. 4166 
[Report No. 114–596] 
A BILL 
To amend the Securities Exchange Act of 1934 to 
provide specific credit risk retention requirements 
to certain qualifying collateralized loan obliga-
tions. 
MAY 26, 2016 
Reported with an amendment, committed to the Com-
mittee of the Whole House on the State of the Union, 
and ordered to be printed 
VerDate Sep 11 2014 
23:21 May 26, 2016
Jkt 059200
PO 00000
Frm 00018
Fmt 6651
Sfmt 6651
E:\BILLS\H4166.RH
H4166
srobinson on DSK5SPTVN1PROD with BILLS