Chapter 6: The Role of Government

Question 1

Identify five key pieces of U.S. legislation designed to discourage, if not prevent, illegal conduct within organizations.

Answer 1

1. The Foreign Corrupt Practices Act.
2. The U.S. Federal Sentencing Guidelines for Organizations.
3. The Sarbanes-Oxley Act.
4. The Revised Federal Sentencing Guidelines for Organizations.
5. The Dodd-Frank Wall Street Reform and Consumer Protection Act.

Question 2

Explain the key provisions of the Dodd-Frank Wall Street reform and consumer Protection Act.

Answer 2

Dodd-Frank was promoted as the “fix” for the extreme mismanagement of risk in the financial sector that lead to a global financial crisis in 2008-2010.

Question 3

The Foreign Corrupt Practices Act

Answer 3

(1977) the act was passed to more effectively control bribery payments to foreign officials an politicians.

Question 4

The U.S. Federal Sentencing Guidelines for Organizations

Answer 4

(1991) FSCO applies to organizations and holds them liable for the criminal acts of their employees and agents.

Question 5

The Sarbanes-Oxley Act

Answer 5

(2002) SOX was a legislative response to a series of corporate accounting scandals that began to dominate financial markets in 2001.

Question 6

The Revised Federal Sentencing Guidelines for Organizations

Answer 6

(2004) the revision modified the 1991 guidelines by requiring periodic evaluation of the effectiveness of corporate compliance and evidence rather than passive compliance.

Question 7

The Dodd-Frank Wall Street Reform and Consumer Protection Act

Answer 7

(2010) Introduced a complex list of rules and restrictions designed to provide greater regulatory oversight of the financial sector, along with improved protection for consumers

Question 8

What are the 3 most actively promoted elements of Dodd-Frank?

Answer 8

1. The Consumer Financial Protection Bureau (CFPB)
2. The Financials Stability Oversight Council (FSOC)
3. The Volcker Rule

Question 9

The Consumer Financial Protection Bureau (CFPB)

Answer 9

Designed as an independently run entity in Federal Reserve, the CFPB promises to act upon any perceived misconduct by financial institutions in the treatment of their customers.

Question 10

The Financials Stability Oversight Council (FSOC)

Answer 10

Led by Treasury secretary and steam of senior financial regulators.

The FSOC is empowered to regulate any bank with assets over 50 billion. Can intervene in any aspect of the banks management

The promised fix for “Too big to fail”

Question 11

The Volcker Rule

Answer 11

This rule limits the ability of bald to trade on their own accounts (invest their own money) in any way that might threaten the financial stability of the institution (or markets as a whole).