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Banking and Finance

Cadwalader Clients & Friends Memo: Two Dodd-Frank Problems--the Effective Date and the Definitions

Contingency Planning in the Absence of a Regulatory Structure

This memorandum first explains the July 16, 2011 problem that will arise because the Dodd-Frank derivatives legislation (Title VII of the statute) goes into effect without either a ready regulatory plan or an operating market structure. The effective date problem is made worse because of drafting problems in Dodd-Frank, including the flawed definition of the single most important term in all of the statute: "swap."

The effective date problems will not be resolved on July 16, 2011. July 16, 2012 will bring another set of problems due to a deadline that cannot be achieved and should not be targeted. The final part of the memorandum recommends that all market participants, in fact, all participants in the economy, contingency plan as to how to conduct their business in the absence of a workable regulatory structure. At best, we will be operating, from July 16, under a law that is far from being implemented, if it can be implemented at all, on the basis of likely-incomplete regulatory exemptions the effectiveness of which depends on statutory language that is itself uncertain.

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