Summary of Dodd-Frank Act: a cheat sheet
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
