Agencies Publish Study on Banking Activities and Investments under Dodd-Frank


On September 8, 2016, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) released a report detailing activities and investments that banking entities may engage in under state and federal law.

Pursuant to section 620 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), which requires the trio of federal banking agencies to conduct the study and report their findings to Congress, the report considers financial, operational, managerial and reputational risks associated with the permissible activities or investments and how banking entities work to mitigate those risks.

Each agency also offers specific recommendations regarding whether an activity or investment could harm the overall safety and soundness of the banking entity or broader financial system and any additional restrictions necessary to curb any such potential risks. Press release. Report.

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.

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.

The SEC Adopts Cross-Border Security-Based Swap Rules

On February 10, the Securities and Exchange Commission (the “SEC”) adopted rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act to regulate both U.S. and foreign dealers who engage in security-based swap dealing activities in the U.S. The rules require non-U.S. companies to include certain transactions in their determinations of whether such companies are subject to registration as security-based swap dealers. The final rules will take effect 60 days after publication in the Federal Register, but compliance is not required until 1 year after the publication or the SBS Entity Counting Date, whichever comes later. Press release.

SEC Issues Staff Report on Accredited Investor Definition

On December 18, the Securities and Exchange Commission issued a staff report (the “Report”) on the definition of “accredited investor” set forth in Rule 501(a) of Regulation D under the Securities Act of 1933. The Dodd-Frank Wall Street Reform and Consumer Protection Act directs the Commission to review the accredited investor definition as it relates to natural persons every four years to determine whether the definition should be modified or adjusted. Staff from the Divisions of Corporation Finance and Economic and Risk Analysis prepared the Report in connection with the first review of the definition.

The Report examines the history of the accredited investor definition and considers comments on the definition received from a variety of sources, including public commenters, the SEC’s Investor Advisory Committee and its Advisory Committee on Small and Emerging Companies. The Report considers alternative approaches to defining “accredited investor,” provides staff recommendations for potential updates and modifications to the existing definition and analyzes the impact potential approaches may have on the pool of accredited investors.

The primary recommendations of the Report are:

  • The Commission should revise the financial thresholds, requirements for natural persons to qualify as accredited investors and the list-based approach for entities to qualify as accredited investors.
  • The Commission should revise the accredited investor definition to allow individuals to qualify  as accredited investors based on other measures of sophistication besides their net worth and income.

The Report suggests detailed alternate approaches to implementing these recommendations.

The Commission is inviting members of the public to provide comments on the accredited investor definition, generally, and specifically on the staff recommendations contained in the Report, although a deadline for submitting comments has not been set.

Final Rule Issued to Establish Minimum Margin Requirements for Non-Cleared Swaps and Non-Cleared Security-Based Swaps

On December 3, 2015, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Farm Credit Administration, and the Federal Housing Finance Agency (collectively, “Agencies”) issued a final rule establishing capital requirements, as well as minimum requirements for the exchange of initial and variation margin, for covered swap entities with respect to non-cleared swaps and non-cleared security-based swaps. The purpose of the requirements is to offset the greater risk to such entities, and thus, the amount of margin required will vary based on relative risk. The final rule implements sections 731 and 764 of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 and will take effect on April 1, 2016 – however, the minimum margin requirements will not phase-in until September 1, 2016. All swap counterparties must comply with the variation margin requirements by March 1, 2017, while swap counterparties with more than $3 trillion in outstanding swap activity must comply with both the initial and variation margin requirements by September 1, 2016. Press Release. Final Rule.

Fed Announces Dates of Stress Test Releases

On February 12, the Fed announced that results from the latest supervisory stress tests conducted as part of Dodd-Frank will be released on March 5, and the related results from the Comprehensive Capital Analysis and Review, will be released on March 11.  Results for both exercises will be released at 4:30 p.m.  Release.


SEC Proposes Rules for Disclosure of Hedging Policies

On February 9, the SEC issued proposed rules that are intended to enhance disclosure of company hedging policies for directors and employees, as mandated by Dodd-Frank. The proposal would require disclosure about whether directors, officers and other employees are permitted to hedge or offset any decrease in the market value of equity securities held, directly or indirectly, by employees or directors. The proposed rules would require disclosure in proxy and information statements for the election of directors and apply to companies subject to the federal proxy rules, including smaller reporting companies, emerging growth companies, business development companies, and registered closed-end investment companies with shares listed and registered on a national securities exchange.  ReleaseProposed Rule.

Federal Reserve Board Issues Final Rule Implementing Dodd-Frank Section 622

On November 5, the Federal Reserve Board issued a final rule implementing Section 622 of the Dodd-Frank Act, which generally prohibits a financial company from combining with another company if the ratio of the resulting company’s liabilities exceeds 10% of the aggregate consolidated liabilities of all financial companies.  Press ReleaseFinal Rule.