Financial Services Regulatory Reform

March 16, 2010

Pardon Our Dust

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On March 14, 2010, Senate Banking Committee Chairman Christopher Dodd (D-Connecticut) released his draft financial services regulatory reform legislation, which has been in the works for months.

Last week, Chairman Dodd ended negotiations with committee Republicans and released his own draft without bipartisan support. He will now do everything possible to move his legislation through his committee and through the Senate over the next two to three months. The House approved its own legislation in December.

Copies of the Dodd draft legislation and a summary are available online.

Highlights of the Dodd bill include:

Consumer Protection: Would create a new independent watchdog housed at the Federal Reserve with the authority to improve available financial information for consumers.

Too Big to Fail: Would create a way to liquidate failed financial firms; would impose new capital and leverage requirements; would update the Fed’s authority to allow system-wide support, but no longer prop up individual firms; and would establish new standards and supervision.

“Systemic Risk” Council: Would create a council to identify and address systemic risks posed by large, complex companies, products, and activities.

Volcker Rule: Would require banks, their affiliates, and bank holding companies, to prohibit proprietary trading, investment in and sponsorship of hedge funds and private equity funds, and to limit relationships with hedge funds and private equity funds. Nonbank financial institutions supervised by the Federal Reserve would also have restrictions placed on their proprietary trading and hedge fund, and private equity investments.

Transparency & Accountability for Exotic Instruments: Would eliminate loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.

Federal Bank Supervision: Would streamline bank supervision to create clarity and accountability, and protect the dual banking system.

Executive Compensation & Corporate Governance: Would provide shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation.

Investor Protection: Would provide new rules for transparency and accountability for credit rating agencies to protect investors and businesses.

Regulatory Enforcement: Would strengthen oversight and empower regulators to pursue financial fraud, conflicts of interest, and manipulation of the system.

McGuireWoods Consulting is closely involved with financial services regulatory reform legislation, and looks forward to assisting existing and new clients as this important legislative process moves forward.

Terry L. Haines

Ronald L. Platt

Frank J. Donatelli

Mona G. Mohib

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