The Dodd Frank Act a cheat sheet Morrison amp Foerster

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THE DODD FRANK,WALL STREET REFORM,AND CONSUMER,PROTECTION ACT. OR DODD FRANK,ACT REPRESENTS,COMPREHENSIVE,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. Numerous government agencies are, Financial Stability Reform 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 Duties of the Council, Chaired by Secretary of Treasury Collect information necessary to assess. Voting members consist of heads of risks to the U S financial system. the Treasury Federal Reserve OCC Provide direction to the Office of. SEC CFTC FDIC FHFA NCUA and Financial Research to support the work. the Bureau of Consumer Financial of the Council, Protection Bureau as well as an Monitor the financial services market.
independent member with insurance place and identify potential threats. expertise appointed by the President and to U S financial stability as well as. confirmed by the Senate regulatory proposals affecting integrity. Non voting members include the efficiency competitiveness and stability. director of the Office of Financial of the U S financial markets. Research the director of the Federal Facilitate information sharing and. Insurance Office a state insurance coordination among member agencies. commissioner a state banking and other federal and state agencies. supervisor and a state securities,commissioner Recommend to the member agencies. general supervisory priorities and, Purpose of the Council principles reflecting the outcome of. Identifying risks to U S financial discussions among the member agencies. stability that may arise from ongoing Identify gaps in regulation that could. activities of large interconnected pose risks to the financial stability of the. financial companies as well as U S, from outside the financial services Require Federal Reserve supervision. marketplace for nonbank financial companies that, Promoting market discipline by may pose risks to U S financial stability. eliminating expectations of government in the event of their material financial. bailouts distress or failure, Responding to emerging threats to Review and submit comments to the.
financial stability SEC and any standard setting body. Morrison 4 Foerster, with respect to an existing or proposed to standards established by the Federal. accounting principle standard or Reserve,Provide a forum for discussion. and analysis of emerging market Creates the Office of Financial Research. developments and financial regulatory which will support the Council through. issues and to resolve jurisdictional data collection and research. disputes among members of the Council Financial companies and nonbank. Provide an annual report and testimony financial companies can appeal Council. before Congress regarding financial requirement to implement stricter. stability standards, Recommend heightened prudential Council must conduct a study on. standards for nonbank financial feasibility benefits costs and structure. companies and large interconnected of a contingent capital requirement for. bank holding companies supervised by nonbank financial companies. the Federal Reserve Council must make recommendations. Recommend to primary financial to the Federal Reserve and other federal. regulatory agencies new or heightened regulators regarding concentration. standards and safeguards for activities limits public disclosures credit. that increase risks of significant liquidity exposure maintenance of long term. credit or other problems spreading hybrid debt convertible to equity and. among bank holding companies general financial information reports. nonbank financial companies and U S If the applicable agency chooses not. financial markets to implement any recommendation, Identify systemically important financial provided by the Council it must provide. market utilities and payment clearing a report explaining its rationale. and settlement activities and require,such utilities and activities to be subject.
Morrison 5 Foerster, Agencies and Agency Oversight Reform The various government agencies regulating. the financial industry with their varying rules,and standards led to certain entities not being. regulated at all with others subject to less, oversight than their peer financial firms organized. under different charters The Dodd Frank Act,overhauls the existing agency oversight system as. described below, Major Agency Changes holding companies Federal Reserve will.
Creation of the Financial Stability continue to regulate State member banks. Oversight Council Council The OCC will regulate national banks. Creation of the Office of Financial and federal thrifts of all sizes and will. Research within the Treasury to support have all rulemaking authority relating to. the Council thrifts, Creation of an independent Bureau of The FDIC will regulate state thrifts of all. Consumer Financial Protection Bureau sizes, within Federal Reserve The OTS will be eliminated all OTS. Creation of the Office of National functions powers authorities rights and. Insurance within the Treasury duties will be transferred to the Federal. Reserve the OCC or the FDIC,Creation of the Office of Credit Rating. Agencies within the SEC The SEC will require registration of. hedge funds that manage over 100, Major Changes in Agency Oversight million as investment advisers threshold. Federal Reserve will regulate thrift for investment advisers subject to federal. holding companies and subsidiaries of regulation to be raised from 25 million. thrift holding companies and will have to 100 million. all rulemaking authority relating to thrift,Morrison 6 Foerster.
The SEC will require registration of required to periodically submit living. municipal financial advisers swap wills to regulators in the event of. advisers and investment brokers financial distress. Municipal Securities Rulemaking Board Federal Reserve will be subject to a one. rules to be enforced by the SEC time GAO audit of the Federal Reserve s. Other lending facilities,Regulators will be required to implement. regulations that prohibit banks,bank holding companies and certain. nonbank financial institutions from,proprietary trading and investments and. sponsorships of hedge funds and private,equity funds. Federal Reserve will have rule,making authority and will act upon.
recommendations of the Council,with respect to rules prohibiting. proprietary trading and investments and,sponsorships of hedge funds and private. equity funds,Large complex companies will be,Morrison 7 Foerster. The final shape of securitization reform is, Securitization Reform beginning to gel In addition to the changes. effected by the Dodd Frank Act the SEC recently,released a 667 page proposed rule amending.
Regulation AB s registration disclosure and, reporting requirements for asset backed securities. and other structured finance products And,the FDIC released a proposed rule amending. its securitization rule safe harbor to require, financial institutions to retain more of the credit. risk from securitizations and reflect recent,accounting changes This was preceded by the. FASB s revisions to accounting rules relating,to sales of financial assets and consolidation of.
certain off balance sheet entities revisions to bank. capital rules to reflect FASB s accounting changes. and the enactment of the Hiring Incentives to,Restore Employment Act which imposes a 30. withholding tax on foreign financial institutions, including certain offshore securitization vehicles. Morrison 8 Foerster,The major elements of securitization reform are. Credit Risk Retention loan brokers or originators the nature. 5 to be retained by the securitizer and extent of the compensation of. however if originator retains some the broker or originator of the assets. amount of risk only the remaining risk backing the security and the amount. up to 5 total will be allocated to of risk retention of the originator or. securitizer securitizer of such assets, Risk retention also to apply to CDOs Fulfilled and unfulfilled repurchase. securities collateralized by CDOs and requests across all trusts will be. similar instruments aggregated by the originator so investors. may identify originators with clear, Risk retention types forms and underwriting deficiencies.
amounts for commercial mortgages to, be determined by regulators including Due diligence analysis must be. permitting a third party that purchases performed by securitizer and provided to. a first loss position at issuance and investors, who holds adequate financial resources Representations and Warranties. to back losses substituting for the risk, retention requirement of the securitizer Credit rating agencies must explain in. reports accompanying credit ratings, Percentage retained can be lowered representations warranties and. based on underwriting standards used enforcement mechanisms available. An exemption for qualified residential to investors and how they differ. mortgages from representations warranties and, Other exemptions will be available at enforcement mechanisms in similar.
regulators discretion issuances,No hedging or transfer of risk Other. Creation of different asset classes which Regulations relating to credit risk. may be subject to different regulations retention requirements will become. effective one year from enactment, Required Disclosures for residential mortgage assets and. Asset level or data level detail including will become effective two years from. data with unique identifiers relating to enactment for all other asset classes. Morrison 9 Foerster, Derivatives Regulation Title VII of the Dodd Frank Act to be known as. the Wall Street Transparency and Accountability,Act of 2010 will impose a comprehensive and. far reaching regulatory regime on derivatives,and market participants Major elements of Title.
VII are summarized below 1 However many, sections of Title VII require various studies to be. undertaken and mandate or permit significant,rulemaking by the Commodity Futures Trading. Commission CFTC the Securities and,Exchange Commission SEC and various. Federal banking regulators As a result a full, assessment of the impact of Title VII will only be. possible once that rulemaking advances, Unless otherwise specified for convenience we refer to swaps and security based swaps as swaps swap dealers and security based swap dealers as swap.
dealers and major swap participants and major security based swap participants as major swap participants or MSPs We also use the term applicable. regulator to refer to the CFTC in the case of swaps and the SEC in the case of security based swaps For a description of the Act s prohibition on proprietary. trading please see our separate summary of the Volcker Rule. Morrison 10 Foerster, Lincoln Provision the Swaps Pushout be physically settled futures contracts. Rule listed FX options debt securities, No Federal assistance e g advances securities options and forwards that. from any Federal Reserve credit facility are subject to the Securities Act of. or discount window that is not part of a 1933 33 Act and the Securities. broad based eligibility program FDIC Exchange Act of 1934 34 Act and. insurance or guarantees may be provided security based swaps FX swaps and. to any swaps entity i e swap dealers FX forwards qualify as swaps unless. and non bank major swap participants or the Secretary of the Treasury determines. MSPs otherwise however notwithstanding any,such determination all FX swaps and. The prohibition does not apply to insured FX forwards must be reported to a swap. depository institutions that limit their data repository or in the absence of one. 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

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