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On June 30, 2010,
the House adopted the conference report on H.R. 4173, the Dodd-Frank Wall
Street Reform and Consumer Protection Act ("Dodd-Frank Bill" or
"Bill"). The Senate is expected to follow suit when it returns from
recess later in July. This alert provides a high-level summary and analysis of
the significant aspects of the Bill. In the days ahead, K&L Gates will be
issuing alerts addressing in detail the various provisions of the Bill.
The conference committee proceedings began on June 10. The conferees worked
arduously over a two-week period and, after working through the night, approved
the conference report early in the morning of June 24. However, early last
week, it became clear that the Senate did not have the 60 votes necessary to
adopt the conference report. Senator Robert Byrd's (D-WV) death resulted in the
loss of a vote. Additionally, Senator Scott Brown (R-MA), who had previously
voted for the measure, came out in opposition due to the financial crisis
assessment that was added toward the end of the conference in order to comply
with statutory pay-as-you-go requirements. The conference committee reconvened
on June 29 in order to substitute that provision by raising the deposit
insurance fund's minimum reserve ratio from 1.15 percent to 1.35 percent and by
ending the Troubled Asset Relief Program early in an effort to address Senator
Brown's concerns and garner his vote. Additionally, memorial services for
Senator Byrd resulted in a truncated work week, deferring further action by the
Senate until after the July 4th Recess.
Please see Emerging Issues alerts Approaching
the Home Stretch: Senate Passes "Restoring American Financial Stability
Act of 2010" and House
Passes Financial Regulatory Reform Legislation for additional information.
The Bill establishes a regulatory framework for monitoring the nation's
financial stability and managing systemic risks. The Bill creates a Financial
Stability Oversight Council ("FSOC"), consisting of ten voting
members who will be the heads of the federal financial regulators, charged with
identifying and monitoring systemic risks to financial markets. The FSOC has
the authority to require, by a 2/3 vote, that nonbank financial companies
(including foreign nonbank financial companies) whose failure would pose
systemic risk be placed under the supervision of the Board of Governors of the
Federal Reserve System ("Federal Reserve"). Among the factors the
FSOC must consider in making this determination are: the company's leverage;
the extent and nature of off-balance sheet exposures; relationships with other
significant nonbank financial companies and significant bank holding companies;
the nature, scope, size, and scale; concentration, interconnectedness and mix
of the company's activities; and any other risk-related factors the FSOC deems
appropriate. The FSOC's authority to subject nonbank financial companies to
heightened regulation by the Federal Reserve is limited to nonbank financial
companies that are "predominantly engaged in financial activities." A
company is "predominantly engaged in financial activities" if at
least 85 percent of its consolidated annual gross revenues or 85 percent of its
consolidated assets are related to activities that are financial in nature.
Access the full version of "Financial Regulatory Reform --
The Next Chapter: Unprecedented Rulemaking and Congressional Activity"
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