Morrison & Foerster
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THE DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT, OR DODD-FRANK ACT, REPRESENTS THE MOST COMPREHENSIVE FINANCIAL REGULATORY REFORM MEASURES TAKEN SINCE THE GREAT DEPRESSION. Morrison 2 Foerster
The Dodd-Frank Act implements changes that, among other things, affect the oversight and supervision of financial institutions, provide for a new resolution procedure for large financial companies, create a new agency responsible for implementing and enforcing compliance with consumer financial laws, introduce more stringent regulatory capital requirements, effect significant changes in the regulation of over the counter derivatives, reform the regulation of credit rating agencies, implement changes to corporate governance and executive compensation practices, incorporate the Volcker Rule, require registration of advisers to certain private funds, and effect significant changes in the securitization market. Although the legislation calls for a number of studies to be conducted and requires significant rule-making, we all will be required to be intimately acquainted with the Dodd-Frank Act. In the pages that follow, we summarize the principal aspects of the Dodd-Frank Act. As lawyers, we would reflexively say that this is a summary, and only a very brief summary at that, and that all of this is qualified in its entirety by reference to our more complete (and far longer) descriptions and analyses….As people who receive lots of summaries, we would say short is usually better. We hope you’ll find these short summaries useful.
Financial Stability Reform
Numerous government agencies are responsible for regulating financial institutions. Commentators have noted that without a governing body to oversee the various agencies, we remain vulnerable to regulatory gaps and oversight failures. The Dodd-Frank Act creates the Financial Stability Oversight Council (“Council”) to oversee financial institutions. Creation of the Council − Chaired by Secretary of Treasury − Voting members consist of heads of the Treasury, Federal Reserve, OCC, SEC, CFTC, FDIC, FHFA, NCUA, and the Bureau of Consumer Financial Protection (“Bureau”), as well as an independent member with insurance expertise appointed by the President and confirmed by the Senate − Non-voting members include the director of the Office of Financial Research, the director of the Federal Insurance Office, a state insurance commissioner, a state banking supervisor, and a state securities commissioner Purpose of the Council − Identifying risks to U.S. financial stability that may arise from ongoing activities of large, interconnected financial companies as well as from outside the financial services marketplace − Promoting market discipline by eliminating expectations of government bailouts − Responding to emerging threats to financial stability Duties of the Council − Collect information necessary to assess risks to the U.S. financial system − Provide direction to the Office of Financial Research to support the work of the Council − Monitor the financial services market place and identify potential threats to U.S. financial stability, as well as regulatory proposals affecting integrity, efficiency, competitiveness, and stability of the U.S. financial markets − Facilitate information sharing and coordination among member agencies and other federal and state agencies − Recommend to the member agencies general supervisory priorities and principles reflecting the outcome of discussions among the member agencies − Identify gaps in regulation that could pose risks to the financial stability of the U.S. − Require Federal Reserve supervision for nonbank financial companies that may pose risks to U.S. financial stability in the event of their material financial distress or failure − Review and submit comments to the SEC and any standard-setting body
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