The US House of Representatives has passed the controversial Financial CHOICE Act despite strong lobbying against the legislation by institutional investors. The bill will now move to the Senate where its expected to face tough opposition.

The Council of Institutional Investors (CII), which has led the fight against the bill championed by Jeb Hensarling, chair of the House Finance Committee,  expressed disappointment at the House giving its approval with the voting following party lines. The CII said it objected to several provisions in the CHOICE Act, which unwinds important shareholder rights and reforms Congress approved over the past 15 years in response to corporate scandals at Enron and other companies and the 2008 financial crisis.

CII Executive Director Ken Bertsch said: "The CHOICE Act would dismantle important shareholder rights, make investing in public companies riskier and undercut the ability of the Securities and Exchange Commission (SEC) to protect investors.

"The CHOICE Act would threaten prudent safeguards for oversight of companies and markets that enhance long-term shareowner value. These include sensible, market-based mechanisms that investors need to hold management and boards of public companies accountable and that foster trust in the integrity of the U.S. capital markets. It is akin to removing seatbelts from cars—it is just too risky."

Meanwhile activist investment firm, Walden Asset Management said that the act had numerous elements of profound concern to investors. Like the CII Walden is particularly concerned about the curtailment of the ability of investors to file shareholder resolutions.  For example, the Act requires an investor to own 1% of a company's stock for three years to be able to file a shareholder resolution, an extraordinary burden, especially when applied to large companies. An investor in Apple would have to own $7 billion worth of stock to file a resolution.

Walden stated: "The effort to eviscerate this long-held right comes just as a growing share of investors are finding the shareholder resolution process vital. For example, this year climate change related resolutions at Occidental Petroleum and ExxonMobil received votes of 67% and 62%, respectively. Resolutions seeking to establish the right of investors to nominate directors (Access to the Proxy) regularly receive more than 50% of the vote.

"For 75 years shareholder resolutions have been an important vehicle to alert companies to issues of concern to shareholders, resulting in positive changes to corporate policies and practices." 

US investor groups believe there will be more opposition to the Act in the Senate with a suggestion that it is now likely to be broken up into a series of smaller bills.