R8.8 - Dodd-Frank Act of 2010 Flashcards
Dodd Frank Title I – Financial stability Act
Creates the Financial Stability Oversight Council (FSOC), which identifies risk and reports on threats to US financial stability
Dodd Frank– Titles
Title I – The Federal Stability Act
Title II – Bankruptcy of Financial Institutions
Title IV – Private Fund Investment Advisors Registration Act
– Volcker Rule
Title VII – Wall Street Transparency and Accountability Act
Title IX – Investor Protection and Securities Reform Act of 2010
Powers of Financial Stability Oversight Council (FSOC)
Investigate and assess risk to the US financial system, and advise Congress and the Federql reserve on ways to enhance the stability of the US financial markets
Collect information from any state or federal financial agency, bank holding companies and non-bank financial companies
Place non-bank financial companies and domestic subsidiaries of international banks under the supervision of the federal reserve if they pose a risk to financial system stability
Break up large, complex financial institutions if they pose a threat to US financial stability
FSOC can require any bank or non-bank institution with assets over $50 billion to submit certified reports
Certified reports contain
– The company’s financial condition
– Systems in place to monitor and control risk
– Transactions with subsidiaries and regulated banks
– Extent to which company activities could pose a risk to financial markets
– Company’s plans for a rapid and orderly shutdown should the company become insolvent
Dodd Frank Title II – Bankruptcy of Financial Institutions
Allows for the liquidation of financial institutions that pose a risk to the stability, that were not previously covered by the FDIC or Securities Investor Protection Corporation (SIPC).
FDIC is primary liquidator of most financial institutions
– Note: Dodd-Frank prohibits FDIC from taking interest in a covered financial company
Orderly Liquidation Authority Panel
Reviews Secretary of the Treasury’s decisions
Orderly Liquidation Fund
– Managed by the FDIC
– Used to cover financial company liquidations not previously covered by the FDIC or SIPC.
Dodd Frank Title IV – Private Fund Investment Advisors Registration Act
Regulate hedge funds and similar investments intermediaries and requires them to make reports.
Exemptions to Dodd Frank Title IV
The following are exempt from reporting requirements:
– Venture capital advisors
– Certain advisers managing assets < $150 million
– Family offices
Volker Rule
Banks can’t trade or invest in a hedge fund or private equity fund if doing so will result in 3%+ ownership of the fund
Dodd-Frank Title VII – Wall Street Transparency and Accountability Act
Regulates over-the-counter derivatives market
Requires cash flow swaps and security-based swaps to be cleared through exchanges or clearinghouses.
Minimum capital and margin requirements for security-based swap dealers and major swap participants
Dodd-Frank Title IX – Investor Protection and Securities Reform Act
SEC-registered broker-dealers and investment advisors must give recommendations that suit their customers’ needs best interests.
Can’t issue securities under Rule 506 of Regulation D if convicted of violating securities laws or subjected to enforcement action by federal or state financial regulators
Nationally Recognized Statistical Rating Organizations (NRSROs) - establish internal control structure wrt credit ratings determination
Shareholders review and approve executive compensation at least once every 3 years
Publicly listed companies must have independent compensation committee
Institutional investment managers in listed companies report at least annually how they voted on any shareholder executive compensation vote
Dodd- Frank Title IX – Investor Protection and Securities Reform Act
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