The Dodd-Frank Wall Street Reform and Consumer Protection Act
Signed into law in 2010, the Dodd-Frank Act is self-described as, "An Act to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end 'too big to fail,' to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes."
Co-proposed by Senator Chris Dodd -- who will present a keynote address at the upcoming 23rd Annual ACFE Fraud Conference & Exhibition, June 17-22, 2012 -- and Representative Barney Frank, the sweeping legislation brought significant changes to financial regulation in the U.S. Upon its passage, the U.S. Senate Committee on Banking, Housing & Urban Affairs provided the following as highlights of the Act (via Banking.Senate.gov):
The creation of a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards and other financial products, and protect them from hidden fees, abusive terms and deceptive practices.
Ends the possibility that taxpayers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed's authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.
Creates a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.
Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated -- including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.
Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and golden parachutes.
Provides tough new rules for transparency and accountability for credit rating agencies to protect investors and businesses.
Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefits special interests at the expense of American families and businesses.
Naturally, the law has not been without political and legal controversy. Politicians, scholars and legal analysts have argued the Act's merits on both sides, with some asserting that the bill is insufficient to achieve its aim, while others contend that it is overly-restrictive and an overreach. It is currently the subject of much debate and is a target among some lawmakers seeking to roll-back its provisions (see: "Is Dodd-Frank being rolled back while no one is looking?")
For more information:
Brief Summary of the Dodd-Frank Wall Street Reform and Consumer Protection Act (PDF) U.S. Senate Committee on Banking, Housing & Urban Affairs The Dodd-Frank Wall Street Reform and Consumer Protection Act (full legislation) U.S. Securities and Exchange Commission (SEC) Implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act U.S. Securities and Exchange Commission (SEC) Frequently Asked Questions Regarding Sections 343 and 627 of the Dodd-Frank Wall Street Reform and Consumer Protection Act Federal Deposit Insurance Corporation (FDIC) Recent Media Coverage:
"U.S. Senate confirms top bank regulators," March 29, 2012 Reuters "U.S. House Panel Approves Bill Limiting Swaps-Regulation Reach," March 27, 2012 Bloomberg Businessweek "Dodd-Frank Act a Favorite Target for Republicans Laying Blame," Sept. 20, 2011 The New York Times