The Dodd-Frank Act
International Association of
Risk and Compliance Professionals (IARCP)
Read the Dodd-Frank Act - The text of the Dodd-Frank Act in an
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for nonbank financial companies, foreign companies and foreign
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The Dodd-Frank Act, Dodd-Frank
bill, or Dodd-Frank financial regulatory reform bill, was named after
its two chief authors, Sen. Chris Dodd (D., Conn.) and Rep. Barney
Frank (D., Mass.).
In order to understand fully the reform, we
need to study 2000+ pages. This is a "too big to read" Act, but it
tries to solve the "too big to fail" problem, along with other
weaknesses in the system. Forget the easy Acts like the Glass Steagall
Act which was 34 pages long.
The full title of the Dodd Frank
Act: An Act to promote the financial stability of the United States by
improving accountability and transparency in the financial system, to
end "too big to fail", to protect the American taxpayer by ending
bailouts, to protect consumers from abusive financial services
practices, and for other purposes.
Enacted by the 111th United
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"We welcome the strong financial
regulatory reform bill in the United States"
THE G-20 TORONTO
SUMMIT, DECLARATION, June 26 – 27, 2010
The financial crisis has imposed huge costs. This must not be
allowed to happen again.
The recent financial volatility
has strengthened our resolve to work together to complete
financial repair and reform.
We need to build a more
resilient financial system that serves the needs of our economies,
reduces moral hazard, limits the build-up of systemic risk and
supports strong and stable economic growth.
have made considerable progress toward strengthening the global
financial system by fortifying prudential oversight, improving
risk management, promoting transparency and continuously
reinforcing international cooperation.
We welcome the strong financial
regulatory reform bill in the United States.
We agreed that the core of the financial sector reform agenda
rests on improving the strength of capital and liquidity and
discouraging excessive leverage.
We agreed to increase
the quality, quantity, and international consistency of capital,
to strengthen liquidity standards, to discourage excessive
leverage and risk taking, and reduce procyclicality.
took stock of the progress of the Basel Committee on Banking
Supervision (BCBS) towards a new global regime for bank capital
and liquidity and we welcome and support its work.
Substantial progress has been made on reforms that will materially
raise levels of resilience of our banking systems.
amount of capital will be significantly higher when the new
reforms are fully implemented.
· The quality of capital
will be significantly improved to reinforce banks’ ability to
The Senate Banking Committee Chairman Chris Dodd (D-CT) issued the
“After great debate, we have produced a strong Wall Street reform
bill that will fundamentally change the way our financial services
sector is regulated.”
“Over the past two years, America
has faced the worst financial crisis since the Great Depression.
Millions of Americans have lost their homes, their jobs, their
savings and their faith in our economy.”
people have called on us to set clear rules of the road for the
financial industry to prevent a repeat of the financial collapse
that cost so many so dearly.”
“This bill meets that challenge.”
“We have succeeded
in creating an office to ensure American consumers get the clear,
accurate information they need to shop for mortgages, credit
cards, and other financial products, and protect them from hidden
fees, abusive terms, and deceptive practices.”
“We found a
way to end too big to fail bailouts, ensuring that no financial
institution will ever be capable of bringing down the economy.”
“We closed loopholes in regulations and required greater
transparency and accountability for over-the-counter derivatives,
asset backed securities, hedge funds, mortgage brokers and payday
“I am proud of this bill, and I am proud of the
open and transparent process that led to such a successful
Financial Regulatory Reform: A New
Over the past two years we have faced the most severe
financial crisis since the Great Depression.
across the nation are struggling with unemployment, failing
businesses, falling home prices, and declining savings.
These challenges have forced the government to take extraordinary
measures to revive our financial system so that people can access
loans to buy a car or home, pay for a child’s education, or
finance a business.
The roots of this crisis go back
decades. Years without a serious economic recession bred
complacency among financial intermediaries and investors.
Financial challenges such as the near-failure of Long-Term Capital
Management and the Asian Financial Crisis had minimal impact on
economic growth in the U.S., which bred exaggerated expectations
about the resilience of our financial markets and firms.
Rising asset prices, particularly in housing, hid weak credit
underwriting standards and masked the growing leverage throughout
At some of our most sophisticated financial
firms, risk management systems did not keep pace with the
complexity of new financial products.
The lack of
transparency and standards in markets for securitized loans helped
to weaken underwriting standards.
Market discipline broke
down as investors relied excessively on credit rating agencies.
Compensation practices throughout the financial services
industry rewarded short-term profits at the expense of long-term
Households saw significant increases in access to
credit, but those gains were overshadowed by pervasive failures in
consumer protection, leaving many Americans with obligations that
they did not understand and could not afford.
crisis had many causes, it is clear now that the government could
have done more to prevent many of these problems from growing out
of control and threatening the stability of our financial system.
Gaps and weaknesses in the supervision and regulation of
financial firms presented challenges to our government’s ability
to monitor, prevent, or address risks as they built up in the
No regulator saw its job as protecting the
economy and financial system as a whole.
approaches to bank holding company regulation focused on
protecting the subsidiary bank, not on comprehensive regulation of
the whole firm.
Investment banks were permitted to opt
for a different regime under a different regulator, and in doing
so, escaped adequate constraints on leverage.
firms, such as AIG, owned insured depositories, but escaped the
strictures of serious holding company regulation because the
depositories that they owned were technically not “banks” under
We must act now to restore confidence in the
integrity of our financial system.
The lasting economic
damage to ordinary families and businesses is a constant reminder
of the urgent need to act to reform our financial regulatory
system and put our economy on track to a sustainable recovery.
We must build a new foundation for financial regulation and
supervision that is simpler and more effectively enforced, that
protects consumers and investors, that rewards innovation and that
is able to adapt and evolve with changes in the financial market.
In the following pages, we propose reforms to meet five key
robust supervision and regulation of financial firms.
Financial institutions that are critical to market
functioning should be subject to strong oversight.
financial firm that poses a significant risk to the financial
system should be unregulated or weakly regulated.
clear accountability in financial oversight and supervision.
• A new Financial Services Oversight Council of
financial regulators to identify emerging systemic risks and
improve interagency cooperation.
• New authority for the
Federal Reserve to supervise all firms that could pose a threat to
financial stability, even those that do not own banks.
Stronger capital and other prudential standards for all financial
firms, and even higher standards for large, interconnected firms.
• A new National Bank Supervisor to supervise all federally
• Elimination of the federal thrift
charter and other loopholes that allowed some depository
institutions to avoid bank holding company regulation by the
• The registration of advisers of hedge
funds and other private pools of capital with the SEC
(2) Establish comprehensive supervision
of financial markets.
Our major financial markets must be strong enough to withstand
both system-wide stress and the failure of one or more large
• Enhanced regulation of
securitization markets, including new requirements for market
transparency, stronger regulation of credit rating agencies, and a
requirement that issuers and originators retain a financial
interest in securitized loans.
• Comprehensive regulation
of all over-the-counter derivatives.
• New authority for
the Federal Reserve to oversee payment, clearing, and settlement
consumers and investors from financial abuse.
To rebuild trust in our markets, we need strong and
consistent regulation and supervision of consumer financial
services and investment markets.
We should base this
oversight not on speculation or abstract models, but on actual
data about how people make financial decisions.
promote transparency, simplicity, fairness, accountability, and
• A new Consumer Financial
Protection Agency to protect consumers across the financial sector
from unfair, deceptive, and abusive practices.
regulations to improve the transparency, fairness, and
appropriateness of consumer and investor products and services.
• A level playing field and higher standards for providers of
consumer financial products and services, whether or not they are
part of a bank.
Provide the government with the tools it needs to manage financial
We need to be
sure that the government has the tools it needs to manage crises,
if and when they arise, so that we are not left with untenable
choices between bailouts and financial collapse.
• A new regime to resolve nonbank financial
institutions whose failure could have serious systemic effects.
• Revisions to the Federal Reserve’s emergency lending
authority to improve accountability.
(5) Raise international regulatory
standards and improve international cooperation.
The challenges we face are not just American challenges, they
are global challenges.
So, as we work to set high
regulatory standards here in the United States, we must ask the
world to do the same.
reforms to support our efforts at home, including strengthening
the capital framework; improving oversight of global financial
markets; coordinating supervision of internationally active firms;
and enhancing crisis management tools.
In addition to
substantive reforms of the authorities and practices of regulation
and supervision, the proposals contained in this report entail a
significant restructuring of our regulatory system.
propose the creation of a Financial Services Oversight Council,
chaired by Treasury and including the heads of the principal
federal financial regulators as members.
We also propose
the creation of two new agencies.
We propose the creation
of the Consumer Financial Protection Agency, which will be an
independent entity dedicated to consumer protection in credit,
savings, and payments markets.
We also propose the
creation of the National Bank Supervisor, which will be a single
agency with separate status in Treasury with responsibility for
federally chartered depository institutions.
national coordination in the insurance sector, we propose the
creation of an Office of National Insurance within Treasury.
Under our proposal, the Federal Reserve and the Federal
Deposit Insurance Corporation (FDIC) would maintain their
respective roles in the supervision and regulation of state
chartered banks, and the National Credit Union Administration
(NCUA) would maintain its authorities with regard to credit
The Securities and Exchange Commission (SEC) and
Commodity Futures Trading Commission (CFTC) would maintain their
current responsibilities and authorities as market regulators,
though we propose to harmonize the statutory and regulatory
frameworks for futures and securities.
contained in this report do not represent the complete set of
potentially desirable reforms in financial regulation.
More can and should be done in the future.
We focus here
on what is essential: to address the causes of the current crisis,
to create a more stable financial system that is fair for
consumers, and to help prevent and contain potential crises in the
HIGHLIGHTS OF THE LEGISLATION
STRONG CONSUMER FINANCIAL
The Consumer Financial Protection Bureau
Led by an independent director appointed
by the President and confirmed by the Senate.
Dedicated budget paid by the Federal Reserve system.
Independent Rule Writing:
Able to autonomously write rules
for consumer protections governing all financial institutions –
banks and non-banks – offering consumer financial services or
Examination and Enforcement:
examine and enforce regulations for banks and credit unions with
assets of over $10 billion and all mortgage-related businesses
(lenders, servicers, mortgage brokers, and foreclosure scam
operators), payday lenders, and student lenders as well as other
non-bank financial companies that are large, such as debt
collectors and consumer reporting agencies. Banks and Credit
Unions with assets of $10 billion or less will be examined for
consumer complaints by the appropriate regulator.
Consolidates and strengthens consumer protection
responsibilities currently handled by the Office of the
Comptroller of the Currency, Office of Thrift Supervision, Federal
Deposit Insurance Corporation, Federal Reserve, National Credit
Union Administration, the Department of Housing and Urban
Development, and Federal Trade Commission. Will also oversee the
enforcement of federal laws intended to ensure the fair, equitable
and nondiscriminatory access to credit for individuals and
Able to Act Fast:
With this Bureau on the
lookout for bad deals and schemes, consumers won’t have to wait
for Congress to pass a law to be protected from bad business
Creates a new Office of Financial
Creates a national consumer
complaint hotline so consumers will have, for the first time, a
single toll-free number to report problems with financial products
Makes one office
accountable for consumer protections. With many agencies sharing
responsibility, it’s hard to know who is responsible for what, and
easy for emerging problems that haven’t historically fallen under
anyone’s purview, to fall through the cracks.
Coordinates with other regulators when
examining banks to prevent undue regulatory burden. Consults with
regulators before a proposal is issued and regulators could appeal
regulations they believe would put the safety and soundness of the
banking system or the stability of the financial system at risk.
Clearly Defined Oversight:
Protects small business from
unintentionally being regulated by the CFPB, excluding businesses
that meet certain standards.
LOOKING OUT FOR THE NEXT BIG PROBLEM:
ADDRESSING SYSTEMIC RISKS
The Financial Stability Oversight
Made up of 10 federal financial regulators and an independent
member and 5 nonvoting members, the Financial Stability Oversight
Council will be charged with identifying and responding to
emerging risks throughout the financial system. The Council will
be chaired by the Treasury Secretary and include the Federal
Reserve Board, SEC, CFTC, OCC, FDIC, FHFA, NCUA and the new
Consumer Financial Protection Bureau. The 5 nonvoting members
include OFR, FIO, and state banking, insurance, and securities
Tough to Get Too Big:
to the Federal Reserve for increasingly strict rules for capital,
leverage, liquidity, risk management and other requirements as
companies grow in size and complexity, with significant
requirements on companies that pose risks to the financial system.
Regulates Nonbank Financial Companies:
require, with a 2/3 vote, that a nonbank financial company be
regulated by the Federal Reserve if the council believe there
would be negative effects on the financial system if the company
failed or its activities would pose a risk to the financial
stability of the US.
Break Up Large, Complex Companies:
Able to approve, with a 2/3 vote, a Federal Reserve decision to
require a large, complex company, to divest some of its holdings
if it poses a grave threat to the financial stability of the
United States – but only as a last resort.
Creates a new Office of Financial Research within
Treasury to be staffed with a highly sophisticated staff of
economists, accountants, lawyers, former supervisors, and other
specialists to support the council’s work by collecting financial
data and conducting economic analysis.
Through the Office of Financial Research and
member agencies the council will collect and analyze data to
identify and monitor emerging risks to the economy and make this
information public in periodic reports and testimony to Congress
Large bank holding companies
that have received TARP funds will not be able to avoid Federal
Reserve supervision by simply dropping their banks. (the “Hotel
floor for capital that cannot be lower than the standards in
BIG TO FAIL BAILOUTS
Limiting Large, Complex Financial
Companies and Preventing Future Bailouts
No Taxpayer Funded Bailouts:
Clearly states taxpayers will
not be on the hook to save a failing financial company or to cover
the cost of its liquidation.
Discourage Excessive Growth &
The Financial Stability Oversight Council will
monitor systemic risk and make recommendations to the Federal
Reserve for increasingly strict rules for capital, leverage,
liquidity, risk management and other requirements as companies
grow in size and complexity, with significant requirements on
companies that pose risks to the financial system.
Requires regulators implement regulations for banks,
their affiliates and holding companies, to prohibit proprietary
trading, investment in and sponsorship of hedge funds and private
equity funds, and to limit relationships with hedge funds and
private equity funds. Nonbank financial institutions supervised by
the Fed will also have restrictions on proprietary trading and
hedge fund and private equity investments. The Council will study
and make recommendations on implementation to aid regulators.
The Council will have the ability to
require nonbank financial companies that pose a risk to the
financial stability of the United States to submit to supervision
by the Federal Reserve.
Payment, clearing, and settlement
Provides a specific framework for promoting
uniform risk-management standards for systemically important
financial market utilities and systemically important payment,
clearing, and settlement activities conducted by financial
Requires large, complex
financial companies to periodically submit plans for their rapid
and orderly shutdown should the company go under. Companies will
be hit with higher capital requirements and restrictions on growth
and activity, as well as divestment, if they fail to submit
acceptable plans. Plans will help regulators understand the
structure of the companies they oversee and serve as a roadmap for
shutting them down if the company fails. Significant costs for
failing to produce a credible plan create incentives for firms to
rationalize structures or operations that cannot be unwound
Creates an orderly liquidation
mechanism for FDIC to unwind failing systemically significant
financial companies. Shareholders and unsecured creditors bear
losses and management and culpable directors will be removed.
Requires that Treasury, FDIC and
the Federal Reserve all agree to put a company into the orderly
liquidation process because its failure or resolution in
bankruptcy would have adverse effects on financial stability, with
an up front judicial review.
Costs to Financial Firms, Not
Taxpayers will bear no cost for liquidating large,
interconnected financial companies. FDIC can borrow only the
amount of funds to liquidate a company that it expects to be
repaid from the assets of the company being liquidated. The
government will be first in line for repayment. Funds not repaid
from the sale of the company’s assets will be repaid first through
the claw back of any payments to creditors that exceeded
liquidation value and then assessments on large financial
companies, with the riskiest paying more based on considerations
included in a risk matrix
Federal Reserve Emergency
Significantly alters the Federal Reserve’s 13(3)
emergency lending authority to prohibit bailing out an individual
company. Secretary of the Treasury must approve any lending
program, and such programs must be broad based and not aid a
failing financial company. Collateral must be sufficient to
protect taxpayers from losses.
financial companies that fail are expected to be resolved through
the bankruptcy process.
Limits on Debt Guarantees:
prevent bank runs, the FDIC can guarantee debt of solvent insured
banks, but only after meeting serious requirements: 2/3 majority
of the Board and the FDIC board must determine there is a threat
to financial stability; the Treasury Secretary approves terms and
conditions and sets a cap on overall guarantee amounts; the
President activates an expedited process for Congressional
Reserve Emergency Lending:
Limits the Federal Reserve’s 13(3)
emergency lending authority by prohibiting emergency lending to an
individual entity. Secretary of the Treasury must approve any
lending program, programs must be broad based, and loans cannot be
made to insolvent firms. Collateral must be sufficient to protect
taxpayers from losses.
Audit of the Federal Reserve:
GAO will conduct a one-time audit of all Federal Reserve 13(3)
emergency lending that took place during the financial crisis.
Details on all lending will be published on the Federal Reserve
website by December 1, 2010. In the future GAO will have authority
to audit 13(3) and discount window lending, and open market
Transparency - Disclosure:
Federal Reserve to disclose counterparties and information about
amounts, terms and conditions of 13(3) and discount window
lending, and open market transactions on an on-going basis, with
specified time delays.
Creates a Vice Chairman for Supervision, a member of the Board of
Governors of the Federal Reserve designated by the President, who
will develop policy recommendations regarding supervision and
regulation for the Board, and will report to Congress
semi-annually on Board supervision and regulation efforts.
Federal Reserve Bank Governance:
GAO will conduct a study of
the current system for appointing Federal Reserve Bank directors,
to examine whether the current system effectively represents the
public, and whether there are actual or potential conflicts of
interest. It will also examine the establishment and operation of
emergency lending facilities during the crisis and the Federal
Reserve banks involved therein. The GAO will identify measures
that would improve reserve bank governance.
Federal Reserve Bank Presidents:
Presidents of the Federal
Reserve Banks will be elected by class B directors - elected by
district member banks to represent the public - and class C
directors - appointed by the Board of Governors to represent the
public. Class A directors - elected by member banks to represent
member banks – will no longer vote for presidents of the Federal
Limits on Debt Guarantees:
bank runs, the FDIC can guarantee debt of solvent insured banks,
but only after meeting serious requirements: 2/3 majority of the
Federal Reserve Board and the FDIC board determine there is a
threat to financial stability; the Treasury Secretary approves
terms and conditions and sets a cap on overall guarantee amounts;
the President initiates an expedited process for Congressional
TRANSPARENCY AND ACCOUNTABILITY FOR DERIVATIVES
Transparency and Accountability to the Derivatives Market
Closes Regulatory Gaps:
Provides the SEC and CFTC with
authority to regulate over-the-counter derivatives so that
irresponsible practices and excessive risk-taking can no longer
escape regulatory oversight.
Central Clearing and Exchange
Requires central clearing and exchange trading for
derivatives that can be cleared and provides a role for both
regulators and clearing houses to determine which contracts should
be cleared. Requires the SEC and the CFTC to pre-approve contracts
before clearing houses can clear them.
Requires data collection and publication through clearing
houses or swap repositories to improve market transparency and
provide regulators important tools for monitoring and responding
Regulates Foreign Exchange Transactions:
Foreign exchange swaps will be regulated like all other Wall
Street contracts. At $60 trillion, this is the second largest
component of the swaps market and must be regulated.
Increases Enforcement Authority to Punish Bad Behavior:
Regulators will be given broad enforcement authority to punish bad
actors that knowingly help clients defraud third parties or the
public such as when Wall Street helped Greece use swaps to hide
the true state of the country’s finances and doubles penalties for
evading the clearing requirement.
Higher standard of
Establishes a code of conduct for all registered swap
dealers and major swap participants when advising a swap entity.
When acting as counterparties to a pension fund, endowment fund,
or state or local government, dealers are to have a reasonable
basis to believe that the fund or governmental entity has an
independent representative advising them.
NEW OFFICES OF MINORITY AND WOMEN
banking and securities regulatory agencies, the bill establishes
an Office of Minority and Women Inclusion that will, among other
things, address employment and contracting diversity matters. The
offices will coordinate technical assistance to minority-owned and
women-owned businesses and seek diversity in the workforce of the
Ensure a Borrower's Ability to Repay:
Establishes a simple
federal standard for all home loans: institutions must ensure that
borrowers can repay the loans they are sold.
Unfair Lending Practices:
Prohibits the financial incentives
for subprime loans that encourage lenders to steer borrowers into
more costly loans, including the bonuses known as "yield spread
premiums" that lenders pay to brokers to inflate the cost of
loans. Prohibits pre-payment penalties that trapped so many
borrowers into unaffordable loans.
for Irresponsible Lending:
Lenders and mortgage brokers who
don’t comply with new standards will be held accountable by
consumers for as high as three-years of interest payments and
damages plus attorney’s fees (if any). Protects borrowers against
foreclosure for violations of these standards.
Consumer Protections for High-Cost Mortgages:
protections available under federal rules on high-cost loans --
lowering the interest rate and the points and fee triggers that
define high cost loans.
Requires Additional Disclosures for
Consumers on Mortgages:
Lenders must disclose the maximum a
consumer could pay on a variable rate mortgage, with a warning
that payments will vary based on interest rate changes.
Establishes an Office of Housing
Counseling within HUD to boost homeownership and rental housing
Raising Standards and Regulating Hedge
Ends the “shadow” financial system by requiring hedge
funds and private equity advisors to register with the SEC as
investment advisers and provide information about their trades and
portfolios necessary to assess systemic risk. This data will be
shared with the systemic risk regulator and the SEC will report to
Congress annually on how it uses this data to protect investors
and market integrity.
Greater State Supervision:
the assets threshold for federal regulation of investment advisers
from $30 million to $100 million, a move expected to significantly
increase the number of advisors under state supervision. States
have proven to be strong regulators in this area and subjecting
more entities to state supervision will allow the SEC to focus its
resources on newly registered hedge funds.
CREDIT RATING AGENCIES
Requirements and Oversight of Credit Rating Agencies
New Office, New Focus at SEC:
Creates an Office of Credit
Ratings at the SEC with expertise and its own compliance staff and
the authority to fine agencies. The SEC is required to examine
Nationally Recognized Statistical Ratings Organizations at least
once a year and make key findings public.
Requires Nationally Recognized Statistical Ratings Organizations
to disclose their methodologies, their use of third parties for
due diligence efforts, and their ratings track record.
Requires agencies to consider
information in their ratings that comes to their attention from a
source other than the organizations being rated if they find it
Conflicts of Interest:
officers from working on ratings, methodologies, or sales;
installs a new requirement for NRSROs to conduct a one-year
look-back review when an NRSRO employee goes to work for an
obligor or underwriter of a security or money market instrument
subject to a rating by that NRSRO; and mandates that a report to
the SEC when certain employees of the NRSRO go to work for an
entity that the NRSRO has rated in the previous twelve months.
Investors can bring private rights of action
against ratings agencies for a knowing or reckless failure to
conduct a reasonable investigation of the facts or to obtain
analysis from an independent source. NRSROs will now be subject to
“expert liability” with the nullification of Rule 436(g) which
provides an exemption for credit ratings provided by NRSROs from
being considered a part of the registration statement.
Right to Deregister:
Gives the SEC the authority to deregister
an agency for providing bad ratings over time.
Requires ratings analysts to pass qualifying exams and have
Eliminates Many Statutory and
Regulatory Requirements to Use NRSRO Ratings:
over-reliance on ratings and encourages investors to conduct their
Requires at least
half the members of NRSRO boards to be independent, with no
financial stake in credit ratings.
Ends Shopping for
The SEC shall create a new mechanism to prevent
issuers of asset backed-securities from picking the agency they
think will give the highest rating, after conducting a study and
after submission of the report to Congress.
EXECUTIVE COMPENSATION AND CORPORATE
Gives Shareholders a Say on Pay and Creating Greater
Executive Pay and Golden Parachutes:
Gives shareholders a say
on pay with the right to a non-binding vote on executive pay and
golden parachutes. This gives shareholders a powerful opportunity
to hold accountable executives of the companies they own, and a
chance to disapprove where they see the kind of misguided
incentive schemes that threatened individual companies and in turn
the broader economy.
SEC authority to grant shareholders proxy access to nominate
directors. This requirement can help shift management’s focus from
short-term profits to long-term growth and stability.
Independent Compensation Committees:
Standards for listing on
an exchange will require that compensation committees include only
independent directors and have authority to hire compensation
consultants in order to strengthen their independence from the
executives they are rewarding or punishing.
Requires that public companies set policies to take
back executive compensation if it was based on inaccurate
financial statements that don’t comply with accounting standards.
Directs the SEC to clarify disclosures
relating to compensation, including requiring companies to provide
charts that compare their executive compensation with stock
performance over a five-year period.
Oversight for Financial Industry:
Requires Federal financial
regulators to issue and enforce joint compensation rules
specifically applicable to financial institutions with a Federal
TO BANK AND THRIFT REGULATIONS
Volcker Rule Implements a strengthened version of the Volcker
rule by not allowing a study of the issue to undermine the
prohibition on proprietary trading and investing a banking
entity’s own money in hedge funds, with a de minimis exception for
funds where the investors require some “skin in the game” by the
investment advisor--up to 3% of tier 1 capital in the aggregate
Abolishes the Office of Thrift Supervision:
this dysfunctional regulator and transfers authorities mainly to
the Office of the Comptroller of the Currency, but preserves the
Deposit Insurance Reforms:
increase in deposit insurance for banks, thrifts and credit unions
to $250,000, retroactive to January 1, 2008.
Adds credit exposure from derivative
transactions to banks’ lending limits.
of holding company subsidiaries:
Requires the Federal Reserve
to examine non-bank subsidiaries that are engaged in activities
that the subsidiary bank can do (e.g. mortgage lending) on the
same schedule and in the same manner as bank exams, Provides the
primary federal bank regulator backup authority if that does not
Intermediate Holding Companies:
Allows use of
intermediate holding companies by commercial firms that control
grandfathered unitary thrift holding companies to better regulate
the financial activities, but not the commercial activities.
Interest on business checking:
Repeals the prohibition on
banks paying interest on demand deposits.
Removes a regulatory arbitrage opportunity by
prohibiting a bank from converting its charter (unless both the
old regulator and new regulator do not object) in order to get out
from under an enforcement action.
Establishes New Offices
of Minority and Women Inclusion at the federal financial agencies
Federal Insurance Office:
Creates the first ever office in
the Federal government focused on insurance. The Office, as
established in the Treasury, will gather information about the
insurance industry, including access to affordable insurance
products by minorities, low- and moderate- income persons and
underserved communities. The Office will also monitor the
insurance industry for systemic risk purposes.
The Office will serve as a uniform,
national voice on insurance matters for the United States on the
Streamlines regulation of surplus
lines insurance and reinsurance through state-based reforms.
Protects Small Businesses from Unreasonable Fees: Requires
Federal Reserve to issue rules to ensure that fees charged to
merchants by credit card companies for credit or debit card
transactions are reasonable and proportional to the cost of
processing those transactions.
CREDIT SCORE PROTECTION
Monitor Personal Financial Rating:
Allows consumers free
access to their credit score if their score negatively affects
them in a financial transaction or a hiring decision. Gives
consumers access to credit score disclosures as part of an adverse
action and risk-based pricing notice.
SEC AND IMPROVING INVESTOR PROTECTIONS
Gives SEC the authority to impose a
fiduciary duty on brokers who give investment advice --the advice
must be in the best interest of their customers.
Creates a program within the SEC
to encourage people to report securities violations, creating
rewards of up to 30% of funds recovered for information provided.
SEC Management Reform:
Mandates a comprehensive outside
consultant study of the SEC, an annual assessment of the SEC’s
internal supervisory controls and GAO review of SEC management.
New Advocates for Investors:
Creates the Investment
Advisory Committee, a committee of investors to advise the SEC on
its regulatory priorities and practices; the Office of Investor
Advocate in the SEC, to identify areas where investors have
significant problems dealing with the SEC and provide them
assistance; and an ombudsman to handle investor complaints.
Provides more resources to the chronically
underfunded agency to carry out its new duties.
Reducing Risks Posed by Securities
Skin in the Game:
Requires companies that sell products
like mortgage-backed securities to retain at least 5% of the
credit risk, unless the underlying loans meet standards that
reduce riskiness. That way if the investment doesn’t pan out, the
company that packaged and sold the investment would lose out right
along with the people they sold it to.
Requires issuers to disclose more information about the
underlying assets and to analyze the quality of the underlying
Better Oversight of Municipal Securities Industry
Registers Municipal Advisors:
Requires registration of
municipal advisors and subjects them rules written by the MSRB and
enforced by the SEC.
Puts Investors First on the MSRB
Ensures that at all times, the MSRB must have a
majority of independent members, to ensure that the public
interest is better protected in the regulation of municipal
Imposes a fiduciary duty on
advisors to ensure that they adhere to the highest standard of
care when advising municipal issuers.
TACKLING THE EFFECTS OF THE MORTGAGE
Provides $1 billion to States and
localities to combat the ugly impact on neighborhood of the
foreclosure crisis -- such as falling property values and
increased crime - by rehabilitating, redeveloping, and reusing
abandoned and foreclosed properties.
Building on a successful Pennsylvania program,
provides $1 billion for bridge loans to qualified unemployed
homeowners with reasonable prospects for reemployment to help
cover mortgage payments until they are reemployed.
Foreclosure Legal Assistance.
Authorizes a HUD administered
program for making grants to provide foreclosure legal assistance
to low- and moderate-income homeowners and tenants related to home
ownership preservation, home foreclosure prevention, and tenancy
associated with home foreclosure.
TRANSPARENCY FOR EXTRACTION INDUSTRY
Requires public disclosure to the SEC
of payments made to the U.S. and foreign governments relating to
the commercial development of oil, natural gas, and minerals.
SEC Filing Disclosure:
The SEC must require those engaged
in the commercial development of oil, natural gas, or minerals to
include information about payments they or their subsidiaries,
partners or affiliates have made to the US or a foreign government
for such development in an annual report and post this information
Congo Conflict Minerals:
Requires those who file with the SEC and use
minerals originating in the Democratic Republic of Congo in
manufacturing to disclose measures taken to exercise due diligence
on the source and chain of custody of the materials and the
Illicit Minerals Trade Strategy:
Requires the State Department to submit a strategy to address the
illicit minerals trade in the region and a map to address links
between conflict minerals and armed groups and establish a
baseline against which to judge effectiveness.
Permanent increase in deposit insurance for
banks, thrifts and credit unions to $250,000, retroactive to
January 1, 2008.
Restricts US Funds for Foreign
Requires the Administration to evaluate proposed
loans by the IMF to a middle-income country if that country's
public debt exceeds its annual Gross Domestic Product, and oppose
loans unlikely to be repaid.