During his first term, President Obama began an ambitious path of reforming the U.S. financial system with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Over two years later, however, many financial regulators are struggling to finalize many key rulemakings, including items such as the regulation of systemically important financial institutions and many foundational aspects of derivatives market reform. Nearly two-thirds of the rulemakings required by Dodd-Frank have not yet been finalized.
The re-election of President Obama for a second term has provided some certainty in the political players and that the Dodd-Frank Act will remain largely intact. With that certainty, Dodd-Frank Act implementation will continue to move forward apace, allowing the Obama Administration to more freely pursue and complete the controversial aspects of its financial services regulatory agenda. Financial regulators will also be encouraged to take up additional rulemakings outside of the Dodd-Frank Act, such as those required by the Jumpstart Our Business Startups Act. Discussed below are the impending, high-stakes regulations that will have a significant impact on the financial services industry – the “Seven Deadly Sins.”
1. Designation of Systemically Important Financial Institutions
The Financial Stability Oversight Council (the “FSOC”), which is composed of the heads of the major financial regulatory agencies and several other nonvoting federal and state officials, is well underway with its chief mandate to designate certain nonbank financial companies as systemically important financial institutions (“SIFIs”) for heightened supervision by the Federal Reserve. However, several major questions regarding the regulation of SIFIs remain unanswered, creating significant uncertainty.
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