Two years ago, on July 21, 2010, President Obama signed into law a package of financial regulatory reforms unparalleled in scope and depth since the New Deal. The Dodd-Frank Act was intended to restructure the regulatory framework for the US financial system, with broad and deep implications for the financial services industry where the crisis started. But its impact also was intended to be felt well beyond the financial sector, extending federal regulation into areas of corporate governance applicable to all US public companies.
Few provisions of the Dodd-Frank Act took effect in the summer of 2010. Instead, the specifics of the Act were intended to be developed through the federal rulemaking process, as the Act mandated the development and implementation of nearly 400 separate regulations to be enacted by, or coordinated among, nearly a dozen federal departments or agencies. To date, the deadlines for more than half of the required rulemakings have expired. But even with these delays, the last two years have witnessed the promulgation of more than 100 rules and the issuance of many additional proposed regulations for public comment. This Report discusses the many strides that have been made pursuant to the Act to date and forecasts what is yet to come.
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On 14 June 2012, the UK government published a White Paper giving details of its proposals for banking reform in the UK, which closely follow the recommendations of the Independent Commission on Banking chaired by Sir John Vickers (the “Vickers report”). As Vickers suggested, the UK is proposing to introduce a requirement for banks to “ring fence” certain retail activities and separate them from investment banking activities. This “ring fence” is effectively the UK’s version of the Volcker rule.
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On April 18, 2012, the Commodity Futures Trading Commission (the “CFTC”) and the Securities Exchange Commission (the “SEC,” and together with the CFTC, the “Commissions”) adopted the much-anticipated joint final rules further defining “swap dealer,” “major swap participant,” “security-based swap dealer,” and “major security-based swap participant” under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).
The final rules are largely consistent with the Commissions’ proposed rules, which were published in the Federal Register on December 21, 2010, with a few significant differences. For example, the final rules raised the de minimis exemption threshold for the swap dealer and security-based swap dealer definition considerably and also removed from the de minimis exemption the limits on the number of swaps or security-based swaps that a person can enter into during a 12-month period and the number of counterparties with which the person can enter into such swaps or security-based swaps during a 12-month period. The final rules also provided the ratio for the “highly leveraged” definition used in the third alternative test for determining whether a person is a major swap participant (“MSP”) or major security-based swap participant (“MSSP”). Another significant change from the proposed rules is the addition to the final rules of a safe harbor from the MSP/MSSP definition and the related tests. These changes and more are discussed in further detail below. [click to continue…]