Dodd-Frank Act

The OCC Proposes Rule to Address Concerns Relating to Exercise of Default Rights Under Qualified Financial Contracts

 

On October 3, 2016, the Office of the Comptroller of the Currency proposed a rule to enhance the resilience of federally chartered and licensed financial institutions. The proposed rule addresses concerns relating to the exercise of default rights under certain financial contracts that could interfere with the orderly resolution of systemically important financial firms. The rule requires, among other things, covered banks to ensure that covered qualified financial contracts (i) limit the exercise of default rights based on the insolvency of an affiliate of a covered bank and (ii) contain contractual stay-and-transfer provisions analogous to the statutory stay-and-transfer provision set forth under title II of the Dodd-Frank Act and the Federal Deposit Insurance Act. Comments on the proposed rule are due on October 18, 2016. Press Release.

CFTC Announces Actions Addressing Application of the Dodd-Frank Act to Cross-Border Transactions

 

On August 4, 2016, the U.S. Commodity Futures Trading Commission (CFTC) announced two separate actions relating to the application of the Dodd-Frank Act to cross-border transactions. The CFTC issued a Final Response to District Court Remand Order in Securities Industry and Financial Markets Association, et al. v. United States Commodity Futures Trading Commission that explains the CFTC’s approach to application of swaps regulations internationally. The CFTC’s Divisions of Swap Dealer and Intermediary Oversight (DSIO), Clearing and Risk, and Market Oversight (Divisions) also issued a no-action letter that extends relief to swap dealers registered with the CFTC from certain transaction-level requirements under the Commodity Exchange Act. Press Release.

Federal Reserve Announces Extension of Conformance Period under Section 13 of the Bank Holding Company Act

On July 7, 2016, the Federal Reserve announced that it will extend until July 21, 2017 the conformance period for banking entities to divest ownership in certain legacy investment funds and terminate relationships with funds that are prohibited under Section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule. The Board had announced in December 2014 that it would make this extension to provide for orderly divestitures and to prevent market disruptions. This is the final of the three one-year extensions that the Board is authorized to grant.

In making this announcement, the Federal Reserve emphasized that: “This extension would permit banking entities additional time to divest or conform only ‘legacy covered fund’ investments, such as prohibited investments in hedge funds and private equity funds that were made prior to December 31, 2013. This extension does not apply to investments in and relationships with a covered fund made after December 31, 2013 or to proprietary trading activities; banking entities were required to conform those activities to the final rule by July 21, 2015.”

The Federal Reserve also noted that the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Commodity Futures Trading Commission: “plan to administer their oversight of banking entities under their respective jurisdictions in accordance with the Board’s conformance rule and this extension of the conformance period.”

Finally, the Board noted that: “upon the application of a banking entity, the Board is permitted under section 619 to provide up to an additional five years to conform investments in certain illiquid funds, where the banking entity had a contractual commitment to invest in the fund as of May 1, 2010.” Release.

The SEC is Seeking Comment on a Joint Agency Proposed Rule Relating to Incentive-based Compensation Arrangements

On May 6, 2016, the Office of the Comptroller of the Currency, Treasury (OCC), the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), Federal Housing Finance Agency (FHFA), the National Credit Union Administration (NCUA), and the U.S. Securities and Exchange Commission (SEC) issued and sought comment on a joint proposed rule to implement section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) relating to the prohibition on and the disclosure of information of incentive-based compensation arrangements.  The deadline for comments is July 22, 2016.  Notice of Proposed Rulemaking and Request for Comment.

Covered Broker-Dealer Provisions Under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act

On February 17, the Securities and Exchange Commission and the Federal Deposit Insurance Corporation “jointly propos[ed] a rule to implement provisions applicable to the orderly liquidation of covered brokers and dealers under Title II of the Dodd-Frank Act[.]”  The two government agencies issued the proposed rule pursuant to the Dodd-Frank Act, which specifically empowers them to regulate the liquidation of specific large financial entities.  Release.

FDIC, Federal Reserve and Office of Comptroller of the Currency Reiterate Annual Public Disclosure Requirements for Medium-Sized Financial Companies Under Dodd-Frank Company-Run Stress Tests

On June 2, the Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve System and Office of the Comptroller of the Currency reiterated the disclosure requirements for annual stress tests conducted by financial institutions with total consolidated assets between $10 billion and $50 billion pursuant to the Dodd-Frank Act. The medium-sized firms are required to disclose certain information, including: a description of the types of risks included in the stress test; a summary description of the methodologies used in the stress test; estimates of losses, revenue, and net income; post-stress capital ratios; and an explanation of the most significant causes for the changes in regulatory capital ratios.  Joint Release.

FHFA Release Results of Fannie Mae and Freddie Mac Dodd-Frank Stress Tests

On April 30, the Federal Housing Finance Agency (FHFA) released a report providing the results of annual stress tests Fannie Mae and Freddie Mac are required to undergo under the Dodd-Frank Act.  The report provide updated information on possible ranges of future financial results for Fannie Mae and Freddie Mac under severely adverse economic conditions.  Press ReleaseReport.

SEC Adopts New Rules for Security-Based Swap Market

On January 14, the SEC adopted new rules that will require security-based swap data repositories (SDRs) to register with the SEC and prescribe reporting and public dissemination requirements for security-based swap transaction data. The SEC also proposed certain additional rules, rule amendments and guidance related to the reporting and public dissemination of security-based swap transaction data.  The rules implement  Title VII of the Dodd-Frank Act. The new rules will become effective 60 days after they are published in the Federal Register.  Release.