Summary of Dodd-Frank Act: a cheat sheet

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The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Prohibition on Proprietary Trading ---> ____ are bank holding companies (BHCs), non-U.S. entities treated as BHCs, insured depository institutions, and affiliates or subsidiaries of the foregoing.

"Banking entities"

Lincoln Provision (the "Swaps Pushout" Rule): No _____ (e.g., advances from any Federal Reserve credit facility or discount window that is not part of a broad-based eligibility program, FDIC insurance, or guarantees) may be provided to any "swaps entity" (i.e., swap dealers and non-bank major swap participants, or MSPs).

"Federal assistance"

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Prohibition on Proprietary Trading ---> ______ are certain U.S. or foreign companies that, though not BHCs or insured depository institutions, predominately engage in financial activities (as defined in the Bank Holding Company Act) and which will become subject to the supervision of the Federal Reserve based on a determination by the Council.

"Nonbank financial companies"

Say-On-Pay: The proxy statement for a meeting involving a "_____" vote would need to include "clear and simple" disclosure of the golden parachute arrangements or understandings and the amounts payable

"Say-on-Golden Parachute"

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Restrictions on Affiliate Transactions ---> A banking entity that serves as an investment adviser or sponsor to a fund or that organizes and offers interests in a fund may not enter into "_____" (as defined under Section 23A of the Federal Reserve Act) with the fund and that banking entity also shall be subject to the restrictions of Section 23B of the Federal Reserve Act in respect of transactions with The Volcker Rule Provisions the fund.

"covered transactions"

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Activities ---> The following activities are "permitted activities": transactions in connection with underwriting or market-making activities, to the extent designed not to ______

"exceed the reasonably expected near term demands of clients, customers or counterparties"

Clearing and Trading Requirements: The term ____ includes swap dealers, MSPs, commodity pools, private funds (as defined in the Investment Advisers Act of 1940), employee benefit plans, and persons predominantly engaged in activities that are in the business of banking or in activities that are financial in nature, but excludes certain captive finance affiliates. The Act directs the applicable regulators to consider whether to exempt small banks, savings associations, farm credit system institutions, and credit unions

"financial entity"

Say-On-Pay: To the extent that any "______" -related compensation is not approved as part of a Say-on-Pay vote, a separate non-binding vote will be required to approve that compensation in the event of a merger or similar extraordinary transaction

"golden parachute"

Other: Large complex companies will be required to periodically submit _____ to regulators in the event of financial distress

"living wills"

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Prohibition on Proprietary Trading ---> A _____ that engages in proprietary trading or fund activities will be subject to additional capital requirements and quantitative limits, to be established by rule.

"nonbank financial company"

Liability: Modification to "_____" requirement for private securities fraud actions against CRAs for money damages

"state of mind"

Major Changes in Agency Oversight: The SEC will require registration of hedge funds that manage over _____ as investment advisers; threshold for investment advisers subject to federal regulation to be raised from $25 million to $100 million

$100 million

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Prohibition on Proprietary Trading ---> Except for certain permitted activities, a "banking entity" cannot _____

(1) engage in proprietary trading, or (2) acquire or retain any equity, partnership or other ownership interest in or sponsor a hedge fund or private equity fund (collectively "fund activities")

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Activities ---> No activity may be deemed a permitted activity if it would ____

(1) result in a material conflict of interest for the banking entity; (2) result in a material exposure for the banking entity to high-risk assets or highrisk trading strategies; or (3) pose a threat to the safety and soundness of the banking

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Conflict of Interest Provisions (Merkley Provisions)--> The prohibition shall be subject to exceptions for the following: _____

-Risk-mitigating hedging activities in connection with underwriting or offering the asset-backed security; provided such activities are designed to reduce specific risk to the financial intermediary associated with positions arising in connection with the assetbacked security offering; and -Purchases or sales of asset-backed securities made pursuant to and consistent with commitments by the financial intermediary to provide liquidity for the asset-backed security

Supervised Nonbanks and Bank Holding Companies with Total Consolidated Assets Equal to or Greater than $50 Billion: These institutions will be subject to a maximum debt-to-equity ratio of ____

15-to-1

Collins Amendment Provisions: All of these requirements become effective upon the adoption of implementing regulations, which are required to be passed within ____ months of the Act's enactment

18

Governance: Independent directors to serve for a fixed, non-renewable term not to exceed ____ years, with compensation not linked to the business performance of the CRA

5

The major elements of securitization reform are: Credit Risk Retention ---> ____ to be retained by the securitizer; however, if originator retains some amount of risk, only the remaining risk (up to 5% total) will be allocated to securitizer

5% `

The major elements of securitization reform are: Required Disclosures ---> _____, including data with unique identifiers relating to loan brokers or originators, the nature and extent of the compensation of the broker or originator of the assets backing the security, and the amount of risk retention of the originator or securitizer of such assets

Asset-level or data-level detail

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Phase-In Period ---> _____ will have two years after the effective date (or two years after the date on which the entity becomes subject to Federal Reserve supervision as a bank entity or a nonbank financial company) to bring their activities into compliance

Bank entities and nonbank financial companies

Regulatory Framework and Key Definitions: ____ will retain jurisdiction over certain aspects of banks' derivatives activities (e.g., capital and margin requirements, prudential requirements).

Banking regulators

Other Governance Provisions: ____ are not permitted to use discretionary authority to vote proxies in connection with election of directors, executive compensation, or other significant matters as determined by the SEC

Brokers

Regulation of Swap Dealers and Major Swap Participants: _____: Swap dealers and MSPs must conform with business conduct standards, including: • Disclosure to non-swap dealer and non-MSP counterparties of the material risks and characteristics of the swaps and any material incentives or conflicts of interest that the swap dealer or MSP may have in connection with the swaps; and • Additional responsibilities with respect to "special entities" (i.e., States, municipalities, State and Federal agencies, pension plans, governmental plans, and endowments): • A swap dealer that acts as an advisor to a special entity has a duty to act "in the best interests of" the special entity; and • A swap dealer or an MSP that offers or enters into a swap with a special entity must comply "with any duty" established by the applicable regulator that requires the swap dealer or MSP "to have a reasonable basis to believe" that the special entity is advised by a qualified independent representative.

Business Conduct Standards.

The major elements of securitization reform are: Credit Risk Retention ---> Risk retention also to apply to ____, securities collateralized by CDOs and similar instruments

CDOs,

Regulatory Framework and Key Definitions: The ____ will have jurisdiction over "swaps" and certain swap market participants

CFTC

Regulation of Swap Dealers and Major Swap Participants: The applicable regulators (for non-banks) and the Federal banking regulators (for banks) will set minimum capital requirements and initial and variation margin

Capital and Margin

Commentators have noted that without _____, we remain vulnerable to regulatory gaps and oversight failures

Commentators have noted that without a governing body to oversee the various agencies, we remain vulnerable to regulatory gaps and oversight failures

Clearing and Trading Requirements: _____: The Act provides an exception to the mandatory clearing requirement if one of the counterparties to the swap (i) is not a financial entity, (ii) is using swaps to hedge or mitigate commercial risk, and (iii) notifies the applicable regulator how it generally meets its financial obligations associated with entering into non-cleared swaps. Application of the exception is at the sole discretion of the commercial end user

Commercial End User Exception.

Major elements of Title VII are summarized below.1 However, many sections of Title VII require various studies to be undertaken and mandate or permit significant rulemaking by the ____

Commodity Futures Trading Commission ("CFTC"), the Securities and Exchange Commission ("SEC"), and various Federal banking regulators.

Conflict of Interest: _____ cannot participate in determining ratings or methodologies, or in sales activities or setting of compensation levels for certain employees

Compliance officers

Required Studies: Required Studies: There are a number of studies required that impact regulatory capital requirements ---> • _______: within two years of enactment, the Council must present the results of a study on contingent capital that evaluates, among other things, the effect on safety and soundness of a contingent capital requirement, the characteristics and amounts of contingent capital that should be required and the standards for triggering such requirements; following this study, the Council may recommend to the Federal Reserve certain minimum contingent capital requirements

Contingent capital

The _____ passed in 2006 requires credit rating agencies (CRAs) to register with the SEC and submit reports.

Credit Rating Agency Reform Act

The major elements of securitization reform are: Representations and Warranties ---> _____ must explain, in reports accompanying credit ratings, representations, warranties, and enforcement mechanisms available to investors and how they differ from representations, warranties and enforcement mechanisms in similar issuances

Credit rating agencies

THE _____, REPRESENTS THE MOST COMPREHENSIVE FINANCIAL REGULATORY REFORM MEASURES TAKEN SINCE THE GREAT DEPRESSION.

DODD-FRANK WALL STREET REFORM AND CONSUMER PROTECTION ACT, OR DODD-FRANK ACT

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): ______ ---> A banking entity may make and retain an investment in a fund that the banking entity organizes and offers; provided, that, it seeks unaffiliated investors for the fund; within one year of a fund's start date, the banking entity's investments shall not exceed more than 3% of the total ownership interests in such fund; and the aggregate of investments in all such funds does not exceed 3% of the banking entity's Tier 1 capital.

De Minimis Investment

Generally, the _____ imposes more stringent regulatory capital requirements on financial institutions

Dodd-Frank Act

The various government agencies regulating the financial industry with their varying rules and standards led to certain entities not being regulated at all, with others subject to less oversight than their peer financial firms organized under different charters. The ____ overhauls the existing agency oversight system as described below.

Dodd-Frank Act

The major elements of securitization reform are: Required Disclosures ---> _____ analysis must be performed by securitizer and provided to investors

Due diligence

Other: _____ prepared by third parties for asset-backed securities must be disclosed and certified

Due diligence reports

Miscellaneous: The Act increases eligibility requirements for ___

ECPs

Compensation Committee and Adviser Independence: _____ is required regarding the use of compensation consultants and any conflicts of interest

Enhanced disclosure

Major Changes in Agency Oversight: The _____ will regulate state thrifts of all sizes

FDIC

Major Changes in Agency Oversight: The OTS will be eliminated, all OTS functions, powers, authorities, rights and duties will be transferred to the ____

Federal Reserve, the OCC, or the FDIC

The Dodd-Frank Act creates the ____ to oversee financial institutions.

Financial Stability Oversight Council ("Council")

Major Agency Changes: Creation of the ____

Financial Stability Oversight Council (Council)

The major elements of securitization reform are: Required Disclosures ---> ____ across all trusts will be aggregated by the originator, so investors may identify originators with clear underwriting deficiencies

Fulfilled and unfulfilled repurchase requests

Other: Federal Reserve will be subject to a onetime ____ of the Federal Reserve's lending facilities

GAO audit

Required Disclosures: _____ required over multiple years, including for ratings that were withdrawn

Historical rating performance data

Required Studies: There are a number of studies required that impact regulatory capital requirements ---> • _____: Within 18 months of enactment, the GAO must conduct a study on the use of hybrid capital instruments and make recommendations for legislative or regulatory actions regarding hybrids

Hybrids

Governance: ____ is based on the presence no consulting, advisory or compensatory fee or status as an associated person of the CRA, and on not being disqualified from any deliberation involving a particular rating

Independence

Custody and Client Requests: _____ held in custody of adviser

Independent verification of client assets

Effect on Hybrids: ____ have a five-year phase-in period

Intermediate U.S. holding companies of foreign banks

On December 30, 2009, the SEC adopted amended Rule 206(4) under the _____ to address certain custody issues.

Investment Advisers Act

Clearing and Trading Requirements: ______: A swap must be cleared if the applicable regulator determines that it is required to be cleared and a clearing organization accepts the swap for clearing

Mandatory Clearing.

Clearing and Trading Requirements: ______ will not apply to existing swaps if they are reported to a swap data repository or, if none, to the applicable regulator in a timely manner.

Mandatory clearing requirement

Clearing and Trading Requirements: _____: To the extent that a swap must be cleared, it must be executed on an exchange or swap execution facility, unless no exchange or swap execution makes the swap available for trading

MandatoryTrade Execution.

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Phase-In Period ---> However, the Federal Reserve may extend the period in order to permit compliance with a contractual obligation that was in effect on ____

May 1, 2010.

Major Changes in Agency Oversight: The SEC will require registration of municipal financial advisers, swap advisers and investment brokers; _____ to be enforced by the SEC

Municipal Securities Rulemaking Board rules

Effect on Hybrids: ____ with less than $15 billion in total consolidated assets are not subject to this prohibition

Mutual holding companies and thrift and bank holding companies

Compensation Committee and Adviser Independence: _____ will prescribe that a compensation committee may only select compensation consultants, legal counsel, or other advisers after taking into consideration independence standards established by the SEC

New listing standards

Clearing and Trading Requirements: ____: Persons who are not eligible contract participants ("ECPs") must always enter into swaps via an exchange. • For swaps, the illegality applies to the non-ECP. • For security-based swaps, the illegality applies to any person effecting the transaction with or for the non-ECP.

Non-ECPs.

Creation of the Council: _____ include the director of the Office of Financial Research, the director of the Federal Insurance Office, a state insurance commissioner, a state banking supervisor, and a state securities commissioner

Non-voting members

_____ are responsible for regulating financial institutions

Numerous government agencies

Major Changes in Agency Oversight: The ____ will regulate national banks and federal thrifts of all sizes, and will have all rulemaking authority relating to thrifts

OCC

Major Agency Changes: Creation of the ____ within the SEC

Office of Credit Rating Agencies

Major Agency Changes: Creation of the ____ within the Treasury to support the Council

Office of Financial Research

Other: Creates the -_____, which will support the Council through data collection and research

Office of Financial Research

Major Agency Changes: Creation of the _____ within the Treasury

Office of National Insurance

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Capital Requirements ---> _____ will adopt additional capital requirements and quantitative limits.

Oversight agencies

_____ were exposed at a rapid pace and clients lost faith in those with custody of their securities and/or funds.

Ponzi schemes

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Services ---> _____ will be subject to Section 23B.

Prime brokerage transactions

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Prohibition on Proprietary Trading ---> _____ is defined as engaging as principal for the trading account of the banking entity or nonbank financial company in any transaction to purchase or sell, or otherwise acquire or dispose of, any security, any derivative, any contract of sale of a commodity for future delivery, any option on any such security, derivative, or contract, or any other security or financial instrument that the appropriate federal agencies may determine.

Proprietary trading

Required Disclosures: ____ and ____ methodologies and assumptions used

Qualitative and quantitative

Regulation of Swap Dealers and Major Swap Participants: ____: Swap dealers and MSPs must register as such and will be subject to a regulatory regime that will be defined, to a very large extent, by rulemaking. Registration is required with an applicable regulator regardless of whether the entity is registered with the other applicable regulator or is a depository institution.

Registration.

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Activities ---> The following activities are "permitted activities": _____ investments;

SBIC

Regulatory Framework and Key Definitions: the ____ will have jurisdiction over "security-based swaps" and certain security-based swap market participants.

SEC

Other: Creation of _____ to promote investor confidence

SEC Investor Advisory Committee to consult on initiatives

Oversight: Establishes _____; director of Office reports to SEC Chairman

SEC Office of Credit Ratings

Creation of the Council: Chaired by ____

Secretary of Treasury

Regulatory Framework and Key Definitions: ____:. A "securitybased swap" is a swap on a single security or loan or a narrow-based security index (generally, an index with 9 or fewer component securities). The definition also includes credit default swaps relating to a single issuer or the issuers in a narrow-based security index.

Security-based Swap

Miscellaneous: Swaps shall not be considered to be insurance and may not be regulated as insurance contracts under ____

State law

Other: _____ to ratings are removed from federal statutes, and federal agencies will review reliance on references to ratings

Statutory references

Compensation Committee and Adviser Independence: _____ must adopt listing standards providing that the members of the compensation committee meet enhanced independence standards comparable (but not identical) to what is required for audit committee members under the Sarbanes-Oxley Act

Stock exchanges

Regulatory Framework and Key Definitions: ______: A "swap dealer" is any person who holds itself out as a dealer in swaps, makes a market in swaps, regularly enters into swaps with counterparties as an ordinary course of business for its own account, or engages in any activity causing the person to be commonly known in the trade as a dealer or market maker in swaps. The term excludes persons that enter into swaps for their own account, either individually or in a fiduciary capacity, but not as a part of a regular business. It also does not include insured depository institutions that offer to enter into swaps with their customers in connection with originating loans with those customers.

Swap Dealer

Regulatory Framework and Key Definitions: _____: This term is broadly defined to include many types of derivatives across various asset classes, but excludes, among other things, nonfinancial or security forwards that are intended to be physically settled, futures contracts, listed FX options, debt securities, securities options and forwards that are subject to the Securities Act of 1933 ("33 Act") and the Securities Exchange Act of 1934 ("34 Act"), and security-based swaps. FX swaps and FX forwards qualify as swaps, unless the Secretary of the Treasury determines otherwise; however, notwithstanding any such determination, all FX swaps and FX forwards must be reported to a swap data repository or, in the absence of one, to the applicable regulator, and swap dealer and MSP counterparties to FX swaps and FX forwards must conform to business conduct standards applicable to swap dealers and MSPs.

Swap.

Discussions relating to the _____ were among the most heated.

Volcker Rule

The _____, named for former Federal Reserve Chairman Paul Volcker, are premised on the belief that speculative trading activities contributed in part to the financial crisis.

Volcker Rule provisions

Creation of the Council: _____ consist of heads of the Treasury, Federal Reserve, OCC, SEC, CFTC, FDIC, FHFA, NCUA, and the Bureau of Consumer Financial Protection ("Bureau"), as well as an independent member with insurance expertise appointed by the President and confirmed by the Senate

Voting members

Title VII of the Dodd-Frank Act, to be known as the _____, will impose a comprehensive and far-reaching regulatory regime on derivatives and market participants.

Wall Street Transparency and Accountability Act of 2010

Enhanced Compensation Disclosure: Companies must disclose the _____ of all employees (except the CEO), the annual total compensation of the CEO, and the ratio of the median employee total compensation to the CEO total compensation

`median annual total compensation

Regulatory Framework and Key Definitions: Major Swap Participant. A "major swap participant" ("MSP") is any person who is not a swap dealer and: Maintains ____ in swaps for any major swap category, excluding positions held for hedging or mitigating commercial risk and positions maintained by any employee benefit plan for the primary purpose of hedging or mitigating any risk directly associated with the operation of the plan;

a "substantial position" (to be defined by the applicable regulators)

Prohibited Activities: CRAs must submit an annual report to the SEC, including ____

a CRA internal controls report along with a CEO attestation

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Activities ---> The following activities are "permitted activities": certain proprietary trading that occurs solely outside of the U.S. by _____

a banking entity that is not directly or indirectly controlled by a banking entity organized under the laws of the U.S.;

Supervised Nonbanks and Bank Holding Companies with Total Consolidated Assets Equal to or Greater than $50 Billion: These standards also should include _____

a contingent capital requirement, requirements for enhanced public disclosures, short-term debt limits, a risk committee requirement, a stress test requirement, and maximum leverage rati

Regulatory Framework and Key Definitions: Major Swap Participant. A "major swap participant" ("MSP") is any person who is not a swap dealer and: Is _____ relative to the amount of capital that it holds, is not subject to any Federal banking agency's capital requirements, and maintains a "substantial position" in outstanding swaps in any major swap category.

a financial entity that is highly leveraged

Duties of the Council: Provide _____ and analysis of emerging market developments and financial regulatory issues, and to resolve jurisdictional disputes among members of the Council

a forum for discussion

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Activities ---> The following activities are "permitted activities": the purchase or sale of securities and derivatives by ____ engaged in the insurance business, subject to state insurance regulation and federal safety and soundness review;

a regulated insurance company

Say-On-Pay: Companies must include _____ in their proxy statements asking shareholders to approve, in a non-binding vote, the compensation of their named executive officers

a resolution

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Services ---> A banking entity or a nonbank financial company may provide prime brokerage services to _____ if the provision of such services complies with other applicable restrictions of the regulations and the CEO (or equivalent officer) of the banking entity certifies annually to such compliance

a sponsored fund

Liability and Disclosures: Mandates a study by the SEC on imposing _____ on financial intermediaries who provide similar advisory services

a uniform fiduciary duty

Other: Requires a study on appropriate criteria for determining ____ and _____.

accredited investor status and eligibility to invest in private funds

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Activities ---> The following activities are "permitted activities": the _____ by a banking entity solely outside of the U.S. if interests in the fund are not offered or sold to a U.S. resident and the banking entity is not directly or indirectly controlled by a banking entity organized in the U.S.; and

acquisition or retention of an ownership interest or the sponsorship of a fund

Clawbacks: Stock exchanges must adopt standards requiring that listed companies develop and implement policies providing for the recoupment of compensation in the event of ____

an accounting restatement

Prohibited Activities: Each CRA must establish, maintain, enforce, and document ____

an effective internal control structure

Major Agency Changes: Creation of ____ within Federal Reserve

an independent Bureau of Consumer Financial Protection (Bureau)`

Conflicts of Interest: Requires a study on conflicts of interest involving ____

analysts

Oversight: SEC will conduct ____ of each CRA; SEC to report on CRA exams

annual exam

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Prohibition on Proprietary Trading ---> However, if a nonbank financial company engages in _____ (i.e., any of the activities that a banking entity is permitted to engage in), the capital requirements or quantitative limits applied to the nonbank financial company for those activities will be the same as those applied to banking entities engaging in such permitted activities.

any permitted activities

Other: SEC rules will require that CRAs establish, maintain and enforce policies and procedures that define and disclose the meaning of ____

any ratings symbol

Miscellaneous: The _____ are authorized to establish aggregate position limits and large trader reporting requirements for swaps

applicable regulators

Liability: Duty to report violations of law to ____

appropriate authorities

Duties of the Council: Collect information necessary to ____

assess risks to the U.S. financial system

The financial crisis took many investors by surprise. It became clear that investors in certain financial products, such as _____, did not understand how the secondary market for such securities functioned.

auction rate securities

Governance: The _____ has specifically mandated oversight responsibilities with respect to policies and procedures for determining ratings, conflicts of interest, internal controls and hiring and promotion

board of directors

Congress also aims to increase investor protection as a means of ____ and _____

bolstering investor confidence and bringing investors back to the capital markets.

Regulation of Swap Dealers and Major Swap Participants: To offset the "greater risk" of noncleared swaps, the ____ must help ensure the safety and soundness of the swap dealers and MSPs and be appropriate for the risk associated with the noncleared swaps held by those entities.

capital and margin requirements

Regulatory Framework and Key Definitions: Certain _____ of manufacturers that use swaps to hedge commercial risks relating to interest rate and FX exposures are excluded from the definition of major swap participant.

captive finance affiliates

The original House bill did not contain Volcker Rule provisions, although it did contain _____(for example, the House bill permitted a ban on proprietary trading that poses systemic risk).

certain limitations on permitted activities

As a result of these provisions, companies will potentially have to ____

change the composition and operation of their compensation committees, adopt new governance and compensation policies, and prepare for an advisory vote on executive compensation

Other Governance Provisions: Disclosure is required of the reasons why the company has _____

chosen to have one person serve as Chairman and CEO, or to have different individuals serve in those roles

Enhanced Compensation Disclosure: Disclosure is required of the relationship of the compensation actually paid to executives versus the ____

company's financial performance

Other: Council must make recommendations to the Federal Reserve and other federal regulators regarding ____

concentration limits, public disclosures, credit exposure, maintenance of long-term hybrid debt convertible to equity and general financial information reports

Recently proposed amendments to SEC rules attempt to address _____, and the Dodd-Frank Act goes even further.

concerns raised regarding CRAs following the financial crisis

SEC Powers: SEC may engage in ____

consumer testing

The major elements of securitization reform are: Other ---> Regulations relating to ____ will become effective one year from enactment for residential mortgage assets, and will become effective two years from enactment for all other asset classes

credit risk retention requirements

Custody and Client Requests: SEC will review rule changes of selfregulatory organizations that affect ____

custody of customer securities or funds

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Activities ---> The following activities are "permitted activities": ____ transactions;

customer

Regulatory Framework and Key Definitions: The Act requires the CFTC and SEC to prescribe a ____ to being designated as a swap dealer

de minimis exception

Collins Amendment Provisions: Raise the specter of additional capital requirements for activities that are determined to be risky, including, but not limited to, _____

derivatives, securitized products, financial guarantees, securities borrowing and lending and repos

Required Disclosures: SEC must require each CRA to accompany publication of each rating with a prescribed form that ____

details, among other things, ratings methodologies

Clearing and Trading Requirements: The _____ may be initiated by the applicable regulator or by a clearing organization, and may relate to any single swap or any group, category, type, or class of swaps.

determination process

The major elements of securitization reform are: Credit Risk Retention ---> Creation of _____, which may be subject to different regulations

different asset classes

Purpose of the Council: Promoting market discipline by ____

eliminating expectations of government bailouts

Liability: Eliminates the _____ from the consent filing requirement for registration statements and potentially subjects CRAs to liability under Section 11 of the 33 Act

exemption provided by Rule 436(g) under the 33 Act

Prohibited Activities: SEC may impose fines, including fines for ____

failure to supervise

Other: Council must conduct a study on ____ of a contingent capital requirement for nonbank financial companies

feasibility, benefits, costs, and structure

Clawbacks: Enhanced disclosure will be required of a company's policy on incentive-based compensation that is based on ____

financial information required to be reported under the securities laws

Conflict of Interest: Compliance office compensation must not be linked to ____

financial performance of a CRA and must be arranged to ensure independence of the compliance officer

Duties of the Council: Provide an annual report and testimony before Congress regarding ____

financial stability

Purpose of the Council: Responding to emerging threats to ____

financial stability

Oversight: Establishes _____ for CRAs; administers SEC rules applicable to CRAs

fines, penalties

Duties of the Council: Identify ____ in regulation that could pose risks to the financial stability of the U.S.

gaps

Enhanced Compensation Disclosure: Disclosure is required of whether any employee or director (or designee of such persons) is permitted to purchase financial instruments designed to ____

hedge their equity securities

The major elements of securitization reform are: Credit Risk Retention ---> No ____ of risk

hedging or transfer

Duties of the Council: Recommend _____ for nonbank financial companies and large, interconnected bank holding companies supervised by the Federal Reserve

heightened prudential standards

Effect on Hybrids: For bank holding companies and systemically important nonbank financial companies, ____ issued prior to May 19, 2010 will be subject to a phase in from January 2013 to January 2016

hybrids

Other: Financial companies and nonbank financial companies can appeal Council requirement to _____

implement stricter standards

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Required Study ---> Within six months of enactment, the Council will conduct a study and make recommendations regarding ____

implementation of these measures.

Other Governance Provisions: The Act authorizes the SEC to promulgate rules allowing certain shareholders to ____ in the company's proxy materials, but does not prescribe specific standards for those rules

include director nominees

Other: SEC will conduct a study regarding _____ of CRAs

independence

Governance: At least half of the CRA board of directors must comprised of _____ (no fewer than 2), with a portion of the directors to include users of ratings

independent directors

Duties of the Council: Facilitate ______ among member agencies and other federal and state agencies

information sharing and coordination

Regulation of Swap Dealers and Major Swap Participants: The Act permits the use of noncash collateral and, for non-cleared swaps, requires swap dealers and MSPs to hold their counterparties' _____, upon request, in a segregated account at an independent third party custodian.

initial margin

Required Disclosures: SEC to issue rules requiring CRAs to disclose information on _____; disclosures to be comparable across CRAs

initial ratings and subsequent changes

Lincoln Provision (the "Swaps Pushout" Rule): The prohibition does not apply to _____ that limit their swap activities to (i) hedging and other similar risk mitigating activities directly related to their activities and (ii) engaging in swaps involving rates or reference assets that are permissible for investment by national banks. For purposes of the exception in clause (ii), CDS is permissible only if cleared.

insured depository institutions

Duties of the Council: Monitor the financial services market place and identify potential threats to U.S. financial stability, as well as regulatory proposals affecting ____

integrity, efficiency, competitiveness, and stability of the U.S. financial markets

SEC Powers: Oversight of private funds managed by ____

investment advisers

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Conflict of Interest Provisions (Merkley Provisions)--> An underwriter, placement agent, initial purchaser, sponsor (or any affiliate) of an asset-backed security (as defined under Section 3 of the 34 Act, but, for these purposes, including synthetic assetbacked securities) shall not engage in any transaction that would ____

involve or result in any material conflict of interest with respect to any investor in a transaction arising out of such affiliate.

Liability and Disclosures: Prohibits or limits use of ____

mandatory arbitration

Duties of the Council: Recommend to primary financial regulatory agencies _____ and safeguards for activities that increase risks of significant liquidity, credit, or other problems spreading among bank holding companies, nonbank financial companies, and U.S. financial markets

new or heightened standards

Lingering concerns with executive compensation and corporate governance practices at public companies (including companies outside of the financial services industry) culminated in specific provisions of the Dodd-Frank Act that require ____

new stock exchange listing standards, mandated resolutions for public company proxy statements, and expanded disclosures for all public companies soliciting proxies or consents.

Miscellaneous: Offers and sales of security-based swaps to non-ECPs must be registered, ____

notwithstanding sections 3 and 4 of the 33 Act

Conflict of Interest: A _____ requirement is imposed on any involvement of specified persons in the ratings process, as well as required reporting of employment transitions for specified CRA personnel

one-year look-back

Purpose of the Council: Identifying risks to U.S. financial stability that may arise from ____

ongoing activities of large, interconnected financial companies as well as from outside the financial services marketplace

In January 2010, the Obama Administration endorsed the Volcker Rule. The Senate bill imposed a prohibition on most proprietary trading by U.S. banks and their affiliates, subject to limited exceptions, and restricted covered institutions from ____

owning, sponsoring or investing in hedge funds or private equity funds.

The major elements of securitization reform are: Credit Risk Retention ---> Risk retention types, forms and amounts for commercial mortgages to be determined by regulators, including ____

permitting a third party that purchases a first-loss position at issuance and who holds adequate financial resources to back losses substituting for the risk retention requirement of the securitizer

Liability and Disclosures: Empowers the SEC to promulgate a fiduciary standard for broker-dealers that provide ____

personalized investment services

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Phase-In Period ---> This _____ may be extended by the Federal Reserve for one year at a time, with extensions not to exceed an aggregate of three years.

phase-in period

Duties of the Council: Require Federal Reserve supervision for nonbank financial companies that may ____

pose risks to U.S. financial stability in the event of their material financial distress or failure

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Activities ---> The following activities are "permitted activities": organizing and offering a _____, if the banking entity: •provides bona fide trust, fiduciary, or investment advisory services; • provides trust or related services and offers interests in the fund only in connection with providing such services only to bank customers; • does not acquire or retain an equity interest, partnership interest, or other ownership interest in the funds except for de minimis investments (see above); • observes the restrictions on affiliate transactions; • does not, directly or indirectly, guarantee or assume, or otherwise insure, the obligations or performance of the fund; • does not share a name or derivation of a name or other marketing with the fund; • does not permit any director or employee of the banking entity to take or retain an equity interest, partnership or other ownership interest in the fund, except for any director or employee who is directly engaged in providing investment advisory services to the fund; and • discloses to prospective and actual fund investors that losses sustained by the fund are not borne by the banking entity;

private equity or hedge fund

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Activities ---> The following activities are "permitted activities": all other activities deemed appropriate by the applicable oversight agencies that would _____

promote the safety and soundness of the banking entity

Effect on Hybrids: The application of the _____ for insured depository institutions to bank holding companies no longer permits the inclusion of trust preferred securities or other hybrid securities in the numerator of Tier 1, subject to certain exceptions and phase-in periods as discussed below

prompt corrective action provisions

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Conflict of Interest Provisions (Merkley Provisions)--> Within 270 days of enactment of the DoddFrank Act, the SEC shall ____

promulgate rules to implement this prohibition.

Liability and Disclosures: SEC may require disclosures if a brokerdealer sells only _____

proprietary products

Other: Regulators will be required to implement regulations that prohibit banks, bank holding companies and certain nonbank financial institutions from ____

proprietary trading and investments and sponsorships of hedge funds and private equity funds

Other: If the applicable agency chooses not to implement any recommendation provided by the Council, it must ____

provide a report explaining its rationale

Regulation of Swap Dealers and Major Swap Participants: The Act does not _____, although Senators Dodd and Lincoln stated in a June 30, 2010 letter to Chairmen Frank and Peterson their view that the Act does not authorize the regulators to impose margin requirements on commercial end users. Note, however, that imposing margin requirements on swap dealers and MSPs for noncleared swaps could, in effect, be passed on to end users through swap pricing and/or margin requirements imposed by swap dealers and MSP

provide an exemption to the margin requirements for commercial end users

The major elements of securitization reform are: Credit Risk Retention ---> An exemption for ____

qualified residential mortgages

Other: SEC will issue rules regarding ____-

ratings procedures and methodologies

Conflict of Interest: Procedures required for the _____ of complaints

receipt, retention and treatment

Liability: Enforcement and penalty provisions of the 34 Act apply to CRA statements to same extent as to ____ or ____

registered public accounting firms or securities analysts

Major Changes in Agency Oversight: Federal Reserve will regulate thrift holding companies and subsidiaries of thrift holding companies, and will have all rulemaking authority relating to thrift holding companies; Federal Reserve will continue to ____

regulate State member banks

The major elements of securitization reform are: Credit Risk Retention ---> Other exemptions will be available at ____

regulators' discretion

Point-of-Sale Disclosures: SEC may issue rules regarding ____

required point-of-sale disclosures

Other: SEC will issue rules regarding _____ for CRA analysts

requisite training, experience and competence

Effect on Hybrids: For newly issued securities (those issued after May 19, 2010), the requirement is ____

retroactively effective

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Activities ---> The following activities are "permitted activities": _____ in connection with a banking entity's individual or aggregate positions, contracts or holdings that are designed to reduce the banking entity's specific risks in connection with such positions, contracts or holdings;

risk-mitigating hedging activities

Other: Federal Reserve will have ____ (and will act upon recommendations of the Council) with respect to rules prohibiting proprietary trading and investments and sponsorships of hedge funds and private equity funds

rulemaking authority

Conflict of Interest: SEC to promulgate additional regulations to prevent ____ and ____ from influencing ratings; SEC may suspend or revoke a CRA's registration for violations

sales and marketing

Prohibited Activities: SEC to promulgate rules separating rating activities from _____ activities

sales and marketing

Miscellaneous: The SEC is authorized to expand the beneficial ownership rules in ____

sections 13 and 16 of the 34 Act to security-based swaps.

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Permitted Activities ---> The following activities are "permitted activities": transactions in U.S. government securities (including ____);

securities of the GSEs

SEC Powers: SEC will be _____

self-funded

Other: Provides for special protection for ____

senior investors

Short Sales: Requires a study on ____

short selling

Other: Additional studies will be required to be conducted, including ____

studies regarding alternative business models, the creation of an independent professional analyst organization, and the ratings process for structured finance products

Regulatory Framework and Key Definitions: Major Swap Participant. A "major swap participant" ("MSP") is any person who is not a swap dealer and: Whose outstanding swaps create _____ that could have serious adverse effects on the financial stability of the U.S. banking system or financial markets; or

substantial counterparty exposure

Duties of the Council: Provide direction to the Office of Financial Research to ____

support the work of the Council

Regulatory Framework and Key Definitions: The Act creates two new categories of significant market participants: _____

swap dealers and major swap participants.

Lincoln Provision (the "Swaps Pushout" Rule): The prohibition only applies to _____, which could be up to five years after enactment

swaps entered into after the end of the transition period,

Duties of the Council: Identify _____ and require such utilities and activities to be subject to standards established by the Federal Reserve

systemically important financial market utilities and payment, clearing, and settlement activities,

As a result, a full assessment of the impact of Title VII will only be possible once ____

that rulemaking advances.

Conflict of Interest: Compliance report required to be filed annually with ____

the SEC

Duties of the Council: Review and submit comments to ____ and any standard-setting body with respect to an existing or proposed accounting principle, standard, or procedure

the SEC

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Prohibition on Proprietary Trading ---> There are important distinctions made between the ____ and the _____

the activities that may be conducted by banking entities and those that may be conducted by nonbank financial companies supervised by the Federal Reserve.

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Phase-In Period ---> Generally, these provisions shall take effect on _____: 12 months after the date of the issuance of the final rules, or two years after the date of enactment of the Dodd-Frank Act.

the earlier of

The Act requires that the Council make recommendations to the Federal Reserve regarding ____

the establishment of heightened prudential standards for risk-based capital, leverage, liquidity and contingent capital.

Other: Requires a study of ____ to oversee private funds

the feasibility of a selfregulatory organization

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Required Study ---> Within nine months of completion of the study, the appropriate agencies will consider ____

the findings and adopt rules to implement these measures.

The following summarizes the key Volcker Rule provisions contained in the Dodd-Frank Act (Title VI): Conflict of Interest Provisions (Merkley Provisions)--> This prohibition will apply for a one-year period that begins on ____

the offering date.

Duties of the Council: Recommend to the member agencies general supervisory priorities and principles reflecting _____

the outcome of discussions among the member agencies

Conflicts of Interest: SEC shall facilitate _____ regarding the terms of relationships with broker-dealers and investment advisers and disclosures of conflicts of interest

the provision of simple and clear investor disclosures

Liability and Disclosures: Mandates a study on whether there are legal or regulatory gaps in standards in the protection of retail customers relating to ____

the standards of care for various financial intermediaries

The major elements of securitization reform are: Credit Risk Retention ---> Percentage retained can be lowered based on ____

underwriting standards used

Other: Changes the accredited investor standard by excluding, in the calculation of net worth, the ____

value of an investor's primary residence

SEC Powers: SEC may share information with federal, foreign and state regulators and law enforcement without ____

waiving privilege

Regulatory Framework and Key Definitions: The Act creates parallel regulatory regimes for the CFTC and SEC and divides jurisdiction between the two regulators based on ____

whether a "swap" or a "securitybased swap" is involved.

Say-On-Pay: A separate resolution will be required to determine ____

whether the Say-on-Pay vote takes place every one, two, or three years

Other: Awards to _____

whistleblowers

Supervised Nonbanks and Bank Holding Companies with Total Consolidated Assets Equal to or Greater than $50 Billion: The Federal Reserve must establish prudential standards for these institutions, which include: --->

• Risk-based capital requirements; • Leverage limits; • Liquidity requirements; • Requirements for a resolution plan; and • Concentration limits

Collins Amendment Provisions: Require the establishment of minimum leverage and risk-based capital requirements --->

• Set the risk-based capital requirements and the Tier 1 to total assets standard applicable to insured depository institutions under the prompt corrective action provisions of the Federal Deposit Insurance Act • Set these current rates as a floor • Limit regulatory discretion in establishing Basel III requirements


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