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The Dodd-Frank Wall Street Reform and Consumer Protection Act

What is the Dodd-Frank Wall Street Reform and Consumer Protection Act?

Signed into law in 2010, the Dodd-Frank Act is a sweeping legislation package that strengthens the oversight and supervision of financial institutions, especially banks and insurance companies. It was created in response to the financial crisis of 2008-2009, which was precipitated by the proliferation of complex and little-understood financial instruments that caused enormous losses in investment portfolios globally.

 

What is the Financial Stability Oversight Council?

The FSOC was created under Dodd-Frank to oversee financial institutions. It is meant to identify 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. One of the primary responsibilities of the FSOC is the designation of systemically important financial institutions (SIFI) that would pose an excessive risk to the economy at large were they to fail.

 

Which kinds of alternative financial institutions are now subject to the SEC’s authority under Dodd-Frank but previously were not?

The SEC now requires hedge funds that manage more than $100 million to register as investment advisers and also requires registration of municipal financial advisers, swap advisers and investment brokers. Under Dodd-Frank, the SEC was also granted authority to enforce rules established by the Municipal Securities Rulemaking Board, while the Act raised the threshold for investment advisers subject to federal regulation from $25 million to $100 million. Many private fund advisers are now required to register with the SEC, with exemptions made for (1) those that advise solely venture capital funds; (2) advisers solely to private funds with less than $150 million in assets under management in the U.S. and (3) certain foreign advisers without a place of business in the U.S.

 

What is the Volcker Rule and is it meant to accomplish?

The Volcker Rule, provided for in Section 619, prohibits insured depository institutions and companies affiliated with insured depository institutions (banking entities) from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments, for their own account. The rules also impose limits on banks’ investments in, and other relationships with, hedge funds or private equity funds. 

 

What does Dodd-Frank do to better regulate financial derivatives?

Dodd-Frank mandates that the riskiest derivatives, including credit default swaps, be regulated by the SEC or the Commodity Futures Trading Commission (CFTC). This ensures that excessive risk-taking can be identified and brought to policy-makers' attention before a major crisis occurs. The law also requires that a clearinghouse, which resembles a stock exchange, be set up where such derivative trades can be transacted in public. But Dodd-Frank leaves it up to the regulators to determine exactly the best way to put this into place, which has led to a series of studies and international negotiations.

News Article

CFPB nominee stonewalls way through Senate hearing

Joe Mont | July 24, 2018

Kathy Kraninger is likely to prevail as President Trump’s nominee to head the CFPB, despite her evasive performance during a hearing before the Senate Banking Committee.

The Filing Cabinet Blog

Fed rule targets risk concentrations among big banks

Joe Mont | June 15, 2018

A new rule from the Federal Resere seeks to prevent concentrations of risk between large banking organizations and their counterparties from undermining financial stability.

The Filing Cabinet Blog

President signs into law Dodd-Frank relief for community banks

Joe Mont | May 24, 2018

On Thursday, President Trump signed a bipartisan bill, the Economic Growth, Regulatory Relief, and Consumer Protection Act, easing the Dodd-Frank Act’s regulatory burden on community banks.

News Article

Dodd-Frank Act rule rollback makes its way through Congress

Joe Mont | May 23, 2018

With some help from Democrats, Congressional Republicans have sent the most significant Dodd-Frank Act regulatory retreat to date on to the desk of President Trump.

The Filing Cabinet Blog

CFTC chair wants to reform and repair Dodd-Frank’s swaps rules

Joe Mont | May 1, 2018

CFTC Chairman J. Christopher Giancarlo is trying to set the stage for what he describes as “regulatory reform 2.0,” with a look back on the Dodd-Frank Act’s swaps rules and where his Commission succeeded, or failed.

News Article

Push for Volcker rule reforms gains momentum

Joe Mont | April 16, 2018

Since the day the Dodd-Frank Act was passed nearly a decade ago, the Volcker rule has been a burr under the saddle for Republicans. Now, their complaints are a lot closer to having a remedy, with plans to ease the rule’s burden on community banks.

The Filing Cabinet Blog

A deep dive into the Senate bill that chips away at the Dodd-Frank Act

Joe Mont | March 21, 2018

On March 15, the Senate, under the leadership of Banking Committee Chairman Mike Crapo, passed what he is calling “the most significant piece of regulatory reform legislation for community financial institutions in nearly a decade” with a bipartisan vote of 67 to 31.

Enforcement Action Blog

SEC doles out its largest ever whistleblower awards

Jaclyn Jaeger | March 19, 2018

The Securities and Exchange Commission today announced its highest ever Dodd-Frank whistleblower awards, with two whistleblowers sharing a nearly $50 million award and a third whistleblower receiving more than $33 million.