Federal Reserve Board Approves Final Rules Defining When Significant Nonbank Firms are “Predominantly Engaged in Financial Activities”

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On April 3, the Federal Reserve Board (“Board”) published a final rule (“Rule”) specifying when a financial company that may be made subject to systemic regulation under Title I of the Dodd-Frank Wall Street Accountability and Consumer Protection Act (“Dodd-Frank Act”) is “predominantly engaged in financial activities” for purposes of being designated for systemic regulation under the Dodd-Frank Act. The Rule is effective on May 6, 2013.

As discussed below, the net effect of the Rule would be to expand the types of activities that might qualify as financial activities for purposes of applying the “predominantly engaged” test, and thus broaden the population of large nonbank firms that might be designated as systemically important financial firms, under the Dodd-Frank Act. Accordingly, large nonbank financial firms should pay close attention to the Rule’s requirements and its potential impact on them.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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