Dodd-Frank Act of 2010 Flashcards
Dodd-Frank Act of 2010
was adopted to promote the financial stability of the United States by improving accountability and transparency in the financial system, ending the idea of “too big to fail,” protecting the American taxpayer by ending bailouts, and protecting consumers from abusive financial practices.
Title I—The Financial Stability Act
Creates the Financial Stability Oversight Council (FSOC), which identifies risks and reports on threats to U.S. financial stability.
Title I—The Financial Stability Act
The FSOC may require any bank or financial institution with assets over $50 billion to submit certified reports regarding, among other things, the company’s financial condition and the company’s plans for rapid and orderly shutdown in the event of insolvency.
Title II—Bankruptcy of Financial Institutions
Provides the necessary authority to liquidate ailing financial institutions that pose a risk to the stability of the U.S. in a manner that mitigates the risk, including power to liquidate financial institutions not previously covered by the FDIC or Securities Investor Protection Corporation (SIPC).
Title II—Bankruptcy of Financial Institutions
Orderly Liquidation Fund—This is a fund managed by the FDIC to cover financial company liquidations not previously covered by the FDIC or SIPC.
Securities Regulation Under Dodd-Frank
Title IV—Private Fund Investment Advisors Registration Act
Regulates hedge funds and similar investment intermediaries and requires them to make reports. Also requires hedge fund intermediaries providing investment advice to keep certain records (e.g., the amount of assets under management, the use of leverage, and side arrangements where certain investors in a fund obtain more favorable rights than other investors).
Securities Regulation Under Dodd-Frank
Volker Rule
Limits trading or investment by a banking entity in a hedge fund or private equity fund if the trading results in more than 3 percent ownership of the fund.
Title VII—Wall Street Transparency and Accountability Act
Title VII requires cash flow swaps and security based swaps to be cleared through exchanges or clearing houses
Title VII—Wall Street Transparency and Accountability Act
Also requires that security-based swap dealers and major swap participants meet minimum capital and margin requirements in amounts to be established in the future.
Title IX—Investor Protection and Securities Reform Act
Broker-Dealer Standards—Recommendations of SEC-registered broker-dealers and investment advisors must be suitable to the needs of their customers and in their customers’ best interests.
Title IX—Investor Protection and Securities Reform Act
Nationally Recognized Statistical Rating Organizations (NRSROs)—Must establish an effective internal control structure governing procedures, policies, and methodologies to determine credit ratings.
Title IX—Investor Protection and Securities Reform Act
Executive Compensation—At least once every three years the compensation of executives must be approved by shareholders. A company may not be listed on a national security exchange unless it has an independent compensation committee.
