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Nutter Bank Report, Special Edition: Dodd-Frank Wall Street Reform and Consumer Protection Act Signed into Law

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The President signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law on July 21, 2010.  The Act is not only one of the most sweeping laws affecting the banking and financial services industries ever to be approved by Congress, but it is also one of the most restrictive.  In general, the Act provides virtually no new authority to banks or financial services companies.  Instead, the Act imposes layers upon layers of new regulation and oversight designed to address different causes of the 2007-2009 crisis in the U.S. financial markets and prevent their recurrence.  For a pdf of Nutter’s detailed Review and Analysis of the Dodd-Frank Wall Street Reform and Consumer Protection Act, click here.


The law is comprised of sixteen broad Titles.  Title I establishes the Financial Stability Oversight Council and requires it to identify systemically significant “nonbank financial companies” for heightened regulation by the Federal Reserve, alongside large bank holding companies.  Title I also includes an amendment offered by Sen. Collins requiring the federal banking agencies to establish new, and likely higher, minimum leverage and risk-based capital requirements that will eliminate trust preferred securities as a permissible component of Tier 1 capital, with certain exceptions.

Title II creates a process for liquidating distressed, systemically significant financial companies that is similar to the receivership process contained in the Federal Deposit Insurance Act.  Title III eliminates the Office of Thrift Supervision and provides for the transfers of its powers to the Federal Reserve, the Comptroller of the Currency and the FDIC.  Title III also makes changes to federal deposit insurance coverage, the assessment base, and the reserve ratio.

Title IV eliminates the private adviser exemption under the Investment Advisers Act of 1940, provides for the regulation of advisers to hedge funds and other funds, and imposes related requirements.  Title V establishes the Federal Insurance Office within the Department of the Treasury and defines its powers and responsibilities.

Title VI makes various changes in the ways depository institutions and depository institution holding companies are regulated.  Among other things, Title VI expands the scope of insider transaction rules and per-borrower lending limits, imposes new limits on proprietary trading in securities (the so-called “Volcker Rule”), imposes new restrictions on thrifts that do not satisfy the qualified thrift lender test, and changes the rules on dividend waivers by mutual holding companies that have partially converted to stock.

Title VII establishes a regulatory and reporting framework for the over-the-counter and security-based swap markets.  Title VII requires the registration of swap dealers and major participants, requires that certain swap contracts be cleared and exchange-traded, and imposes other related requirements.

Title VIII establishes a new framework for the regulation of payment, clearing and settlement activities.  Among other things, Title VIII requires the establishment of uniform risk-management standards for systemically important payment, clearing, and settlement activities and the institutions that manage or operate systems in which activities of that kind are carried out.

Title IX seeks to better protect investors in securities.  Among other provisions, Title IX grants the SEC authority to hold brokers and dealers providing investment advice to the same standards that investment advisers are held to, establishes an Office of Credit Ratings within the SEC to ensure that ratings are not unduly influenced by conflicts of interest, requires firms that package loans or securities and sell units in them to retain an ownership interest, imposes new executive compensation requirements, and requires registration of advisors to municipalities.

Title X establishes the Bureau of Consumer Financial Protection as an independent bureau in the Federal Reserve System to regulate the offering of consumer financial products and services, makes it harder for courts and the Comptroller of the Currency to determine that state laws protecting consumers in financial matters are preempted by federal laws that apply to national banks and federal savings banks and, among other provisions, authorizes the regulation of interchange fees and makes it harder for payment networks to dictate terms to merchants.

Title XI restricts the Federal Reserve’s ability to provide emergency financial assistance in the future.  Among other provisions, Title XI requires the Federal Reserve to establish policies and procedures governing its emergency lending authority to ensure that any emergency lending program in the future does not aid a particular failing financial company, protects taxpayers from losses, and is ended in a timely fashion.  Title XI also requires the Federal Reserve to report, in detail, on its website, all financial assistance provided from December 1, 2007 to July 21, 2010.

Title XII is intended to improve access to mainstream financial institutions.  Title XIII reduces the maximum amount available under the Emergency Economic Stabilization Act of 2008, and provides, among other things, that no authority under the Emergency Economic Stabilization Act may be used to incur any obligations under any new programs.

Title XIV imposes new requirements on mortgage lenders including, among others, a prohibition on certain financial incentives that would encourage a mortgage originator to steer a consumer to a higher-cost mortgage, and a prohibition on making a residential mortgage loan unless a determination is made that the borrower has a reasonable ability to repay the loan.  The rules apply to depository institutions and other mortgage lenders.

Title XV imposes miscellaneous requirements.  Among other provisions, the Government Accountability Office is required to issue a report assessing the relative independence, effectiveness, and expertise of presidentially appointed inspectors general and inspectors general of designated federal entities.  Title XVI Act amends Section 1256 of the Internal Revenue Code.

For a pdf of Nutter’s detailed Review and Analysis of the Dodd-Frank Wall Street Reform and Consumer Protection Act, click here.

Nutter Bank Report

Nutter Bank Report is a monthly electronic publication of the Banking and Financial Services Group of the law firm of Nutter McClennen & Fish LLP.  This special edition was prepared by the Banking and Financial Services Group, Commercial Finance Group, and Securities Regulation Group of Nutter McClennen & Fish LLP.  Assistance in the preparation of this issue was provided by Lisa M. Jentzen.  The information in this publication is not legal advice, and may be considered advertising under the rules of some jurisdictions.  For further information on the matters covered in this publication, contact your attorney at Nutter. 

This review and analysis is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising.

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