Academic literature on the topic 'Dodd-Frank Wall Street Reform and Consumer Protection Act (United States)'

We argue that implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act has contributed significantly to the reduction of systemic risk in the United States. However, Dodd-Frank also introduced burdensome rules that have little to do with systemic risk. This article evaluates the trade-off between capital regulation and regulation of scope in the context of Dodd-Frank, with a particular emphasis on the Volcker Rule. Recent regulatory reforms aimed at rolling back Dodd-Frank are evaluated and discussed.

At the signing of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”), President Barack Obama asserted that, “We all win when investors around the world have confidence in our markets. We all win when shareholders have more power and more information. . . . And we all win when folks are rewarded based on how well they perform, not how well they evade accountability.” After the financial crisis in 2008, the Obama Administration recognized the need to reconstruct the existing American financial regulatory system to ensure that a financial meltdown would never happen again. It is quite clear that Congress’s purpose behind the Dodd-Frank Act is to redevelop the financial system to ensure that the 2008 financial crisis will never be repeated. However, the Dodd-Frank Act contains considerable provisions that add substantial new requirements for certain publicly traded companies based in the United States. Analysts have theorized that the creation of new regulations relating to executive compensation and corporate governance was due to assertions that large executive pay contributed to the financial crisis. There has been much debate over whether such changes to executive compensation and corporate governance practices under Title IX of the DoddFrank Act are meeting the intended goals of financial system reform.

One of the near casualties of the global financial crisis (Crisis) was the march toward a more principles-based global regulatory structure that simultaneously encouraged cross-border transactions and recognized sovereign authorities over them without the necessity of a one-size-fits-all regulatory framework. The implementation of the G20 reforms for over-the-counter derivatives was far more prescriptive than principled. Post-crisis implementation of the G20 reforms, embodied in the United States in Title 7 of the Dodd Frank Wall Street Reform and Consumer Protection Act, yielded a costly, and in some markets, persistent loss of liquidity and fragmentation as market participants have attempted to sort out complex and sometimes competing regulatory requirements for reporting, trading, clearing, margin, and capital in practice.

Purpose The article examines a current debate over pay ratio rulemaking in the United Kingdom. In the United States, the Securities and Exchange Commission issued a rule that requires public companies to disclose the ratio of the annual pay of their chief executive officer to the median of their employees’ pay in 2015. The United Kingdom has considered making a similar rule under Prime Minister Theresa May. Design/methodology/approach The article provides a concise analysis of the current debate over a rule regarding pay ratio in the United Kingdom. It also highlights characteristics and concerns by comparing pay ratio disclosure in the United States. Findings The United Kingdom seems to have taken the first step toward pay ratio rule, similar to Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the so-called pay ratio disclosure. Some differences can however be found in manifestos and many issues and uncertainties still remain for rulemaking. Originality/value This article provides information on a prospect for a pay ratio rule in the United Kingdom.

A shareholder vote on executive compensation, the so-called “say on pay”, has become one of the most prominent corporate governance tools for regulators in their urge to tackle excessive executive remuneration. Its implementation in the United Kingdom in August 2002 has triggered–not least because of a Recommendation of 2004 by the European Commission–a broader discussion of this instrument which gradually led to the adoption of related rules throughout Europe. In Germany, a “say on pay” was enacted by the German Parliament (Deutscher Bundestag) as part of the Act on the Appropriateness of Management Board Compensation (Gesetz zur Angemessenheit der Vorstandsvergütung–VorstAG) on 18 June 2009, it passed the second chamber of the German Parliament (Deutscher Bundesrat) on 5 July 2009 and was promulgated in the legal gazette (Bundesgesetzblatt) on 31 July 2009. The new law became effective on 5 August 2009. In the meantime, the United States also enacted provisions with respect to a shareholder vote on executive compensation. The Dodd-Frank Wall Street Reform and Consumer Protection Act, often only referred to as the “Dodd-Frank-Act”, introduced a mandatory, non-binding “say on pay”, as well as a more specific shareholder vote on payments in the context of a change of control (“golden parachutes”). The SEC recently adopted rules in order to implement these provisions.

Abstract Statelessness affects around 10 million people globally, many of whom are children. Many public law initiatives to diminish and eradicate statelessness exist, yet the problem persists. This article explores the potential for the private law to contribute to a solution to this problem, leading to increased awareness of the plight of stateless children among the public, investors, governments, and multinational corporations. In doing so, the article examines the role of the private law in regulating the use of so-called “conflict minerals” in the United States and internationally. It recognizes the contribution made by conflict minerals legislation towards finding an effective solution to the conflict in the Democratic Republic of the Congo. The article proposes, amongst other initiatives, a legislative solution to the enduring problem of child statelessness, adapting provisions of the Dodd-Frank Wall Street and Consumer Protection Act which requires corporate reporting and disclosure in relation to international supply chains of public limited companies in respect of conflict minerals, and applying them instead to the causes of child statelessness.

Credit rating agencies have long played an important rolein the economy of the United States. In response to thefinancial crisis of 2008, the Dodd-Frank Wall Street Reformand Consumer Protection Act introduced reforms to increasethe transparency and accountability of credit rating agencies.With the rise of cryptocurrencies and the expansion ofblockchain technology, established credit rating agencies arenow considering offering ratings for cryptocurrencies, in thesame way they rate traditional securities. Borrowing from the lessons learned from the experience ofthe 2008 financial crisis, this Note proposes that the UnitedStates government create a public agency to providecryptocurrency ratings. The Note begins by providingbackground information on cryptocurrencies, blockchaintechnology, credit rating agencies, and the subprime mortgagecrisis of 2008. Next, it discusses problems in the credit ratingprocess that were not solved by Dodd-Frank—namely, theprevalence of fraud and conflicts of interest between ratingagencies and issuers. The Note then proposes the publiccryptocurrency rating agency solution and additionalsupplementary reforms that may be adopted to address these unsolved problems.

In 2010, the Dodd-Frank Wall Street Reform and Con- sumer Protection Act restructured the regulatory regime for fi- nancial institutions in the United States by mandating corpo- rate governance reforms and requiring that firms maintain high levels of high-quality capital reserves in their U.S. legal entities. Likely the most consequential of the statute’s provi- sions was that which authorized Regulation YY, a landmark regulation that transformed capital planning and risk man- agement processes among financial institutions in the United States. Along with implementing enhanced prudential stand- ards for the U.S. operations of large, complex financial insti- tutions, Regulation YY altered the corporate structure of for- eign banking organizations (“FBOs”) by requiring large foreign banking institutions to establish a new legal entity, called an intermediate holding company (“IHC”). Put simply, IHCs were created to reorganize and capture, in one umbrella legal entity, all non-branch U.S. operations of FBOs. Further, to ensure robust, localized oversight of U.S. operations, each IHC is required to establish their own board of directors and risk committee, separate and apart from the board and com- mittees of the broader organization. IHCs are also required to comply with both the capital and leverage ratio requirements applied to similarly large domestic financial institutions, and the programmatic requirements associated with firms of that size (resolution planning, CCAR, CLAR). There is another regulation, though, that when coupled with the far-reaching implications of Regulation YY has dis- parately impacted foreign banking organizations. That regu- lation is Regulation W, a longstanding regulation that limits the amount of intracompany transactions banking organiza- tions can engage in. Following the enactment of Dodd-Frank, Regulation W was amended in several ways which limited spe- cifically the types of transactions that FBOs often engage in with their affiliates to manage their liquidity risk and to ab- sorb liquidity shocks. The post-crisis changes made to Regula- tion W have already begun to be rolled back by U.S. regulators, however there has not yet been a detailed analysis of how spe- cifically the interaction between Regulation YY and Regulation W undermines global financial stability. The specific aim of this Note is to evaluate whether Regu- lation YY and Regulation W have destabilized the global fi- nancial system. Institutions’ 2018 and 2019 CCAR results will be the lens through which the impact of the regulations is eval- uated. Specifically, we look at both institutions’ Tier 1 capital ratios and Tier 1 leverage ratios to assess how specifically the IHCs have positioned their liquid capital and adjusted their business model in response to Regulation YY reorganization. Ultimately, we conclude that the interaction between Regula- tion YY and the revised Regulation W has dramatically frag- mented the global flow of capital among FBOs. Regulation YY’s IHC reorganization mandate largely cabins foreign banks’ ability to absorb liquidity shocks through their organi- zations—a result that may pose a serious threat to global fi- nancial stability. That is, the fundamental disruption of insti- tutions’ ability to funnel liquidity to their network of legal entities around the world raises a significant concern regard- ing their resiliency during periods of stress, particularly for those systemically important firms who experienced pervasive liquidity issues in the most recent crisis.

Plusieurs trillions de dollars d’actifs sous gestion : tel est le poids de l’industrie des hedge funds dans le système financier. Acteurs indispensables des marchés, les hedge funds sont pourtant des créatures méconnues. Réservés aux investisseurs professionnels ou qualifiés, ils ont longtemps tiré partie d’exemptions et échappé à une trop forte contrainte réglementaire. La crise financière de 2008 a bouleversé ce schéma et fait apparaître, en Europe et aux États-Unis, une même volonté d’encadrer davantage ces structures, par le biais de leurs gestionnaires. Aussi cette étude propose-t-elle une analyse comparée des dispositions introduites en la matière par la directive AIFM et par le Dodd Frank Act. Après un nécessaire éclairage sur cette industrie de l’ombre, elle examine les apports des deux textes, les confronte avant d’en dégager forces et faiblesses. Le traumatisme de la crise a fait émerger un double impératif : mieux protéger les investisseurs et prévenir le risque systémique. C’est à la lumière de ces deux objectifs que la seconde partie s’attarde sur le bien-fondé des réformes, leur portée réelle ainsi que leurs limites. Cette vue d’ensemble de la régulation applicable aux gestionnaires de hedge funds est également prétexte à une réflexion plus large sur la régulation financière, ses finalités, ses contours et ses défis. Nous concluons sur une feuille de route pour un acte II de la directive AIFM et formulons plusieurs propositions, en particulier l’interdiction totale de commercialisation auprès d’investisseurs de détail et la création d’une base de données mondiale du risque systémique
The hedge fund industry manages several trillion dollars in assets. Though they are key players of the financial system, hedge funds remain mysterious creatures. Available only to professional or qualified investors, they managed, for a long time, to take advantage of exemptions and to avoid a heavy regulatory burden. The 2008 financial crisis profoundly changed perspectives and led the European Union and the United States to introduce new regulations targeting hedge funds, through their managers and advisers. This study is a comparative analysis of such regulations, brought about by the AIFM Directive and the Dodd Frank Act. After a brief overview of the industry, both texts are examined and compared so as to identify their respective strengths and weaknesses. Two imperatives emerged out of the crisis: increasing investor protection and preventing systemic risk. In light of these two objectives, part II discusses the validity of the reforms, their scope and their limits. This extensive analysis of hedge fund regulation also leads to broader remarks on financial regulation, its aims, contours and challenges. Finally, a roadmap for a revised version of the AIFM Directive is proposed and concrete measures are suggested, such as the total prohibition of marketing to retail investors and the creation of a global database of systemic risk

This dissertation aims to study the behavior of intermediaries under market imperfections and the consequences of that for the financial market's functioning. To do so, I focus on two classes of market frictions: funding constraints and information asymmetry. Chapter 1 studies how the dealers' capital constraints affect the market liquidity in the presence of imperfect competition and how recent regulations have shifted the competitive landscape of interest rate swaps. On the subject of informational frictions, Chapters 2 and 3 study empirically and theoretically the pace at which prices incorporate private information under the limited learning capacity of the informed traders. Understanding the microstructure of the swap markets is of interest to both policymakers and academics, especially for it helps in the efficient implementation of post-crisis regulations, namely the Dodd-Frank Act. An understudied dimension of the swap market microstructure is the determinants of the cost of the market-making activity. Using a proprietary regulatory dataset collected by the Commodity Futures Trading Commission (CFTC) on both the interest rate swap transactions and the collateral requirements at the London Clearinghouse (LCH), in Chapter 1, I study the key balance sheet constraints that affect the ability of the bank-affiliated dealers to provide intermediation service to the end-users. Most of the interest rate swaps are now mandated to be centrally cleared. This has increased the dealer's need for collateral in the form of highly liquid assets (cash and cash equivalents) to back their swap exposures. Facing capital adequacy measures such as Supplementary Leverage Ratio (SLR), dealers find it even costlier to increase the size of their balance sheet to fund these margins. I show that a 1-percentage point increase in SLR leads to an increase of 1.09 percentage points in the bank's cost of capital per unit of margin requirement. Furthermore, I find the funding spread of the dealers (the difference between the cost of external funding and the risk-free rate) is also a relevant factor for determining the dealer's marginal cost of swap transaction; a cost that is evidently transferred to the end-users in the form of less favorable prices. Measuring the cost of intermediation for the dealer-to-client interest rate swap market is challenging because of the high concentration in the market-- the first seven dealers intermediate more than 50% of the total notional traded. Therefore, one must consider the nontrivial effect of markups in transaction prices to estimate the marginal cost of intermediation reliably. For this reason, I model a differentiated product demand for swaps in the spirit of empirical Industrial Organization (IO) literature and structurally estimate this model to account for the markups in the transaction prices using estimated price elasticities. The demand estimations show economically interpretable heterogeneity among the end-users in their taste for duration risk hedging. The structurally estimated equilibrium model of intermediation can serve as a basis for answering counterfactual policy questions, especially in the debate on the social costs and benefits of excluding initial margins in calculating supplementary leverage ratio. In Chapter 2, I turn the focus to the impact of informational frictions on market-making activity. More specifically, we study the informed trading under random stopping time. Empirical evidence is provided based on an episode of time when the Securities and Exchange Commission (SEC) unintentionally disclosed security filings to some investors before the public for several years. For technological reasons, the delay between the private and public disclosure was exogenously random. We exploit the variation in the time window of private information to show the intensity of trades and the speed at which market prices reach their efficiency, decrease with the expected arrival time of public announcement. In addition, we find the learning capacity of the insider determines the evolution of trading intensity over time. In Chapter 3, inspired by the stylized facts observed in the earlier chapter, I extend the Kyle (1985) model of strategic trading to a case with limited learning capacity of both the dealers and the informed traders (insiders). The insider does not perfectly observe the true value of the security, but he continues to hone his knowledge by using private information sources over time. Two classes of equilibria emerge from this model. In one class, the insider trades excessively patiently, and the market efficiency is reached only asymptotically. In the second type, the insider optimally chooses a deterministic time T, before which he trades patiently as in Kyle (1985) until the price reaches its full efficiency. After T, the insider keeps revealing every piece of new information immediately, and the market price stays efficient while the insider keeps making profits. Which equilibrium emerges depends on the insider's learning capacity, initial informational advantage, and the private source's informational content.

Open banking – promoted in the European Union by the access to account rule contained in the Directive (EU) 2015/2366 on payment services in the internal market (PSD2) – is supposed to enhance consumer’s welfare and to foster competition. However, many observers are fearful about the negative effects of the entry into the market of the so-called BigTech giants. Unless incumbent banks are able to rise above the technological challenges, the risk is that, in the long run, BigTech firms could dominate the market, by virtue of their great ability to collect data on consumer preferences, and to process them with sophisticated tools, such as Artificial Intelligence and Machine Learning techniques; not to mention the possible benefits arising from the cross-subsidisation. This paper aims at analysing the controversial relationship between open banking and competition. In this framework, many aspects must be clarified, such as the definition of the relevant markets; the identification of the dominant entities; the relationship with the essential facility doctrine. The specific competition problems encountered in the financial sector need to be inscribed in the context of the more general debate around access to data in the digital sphere. The evolving scenario poses a serious challenge to regulators, calling them to strike the right balance between fostering innovation and preserving financial stability. The appraisal intends not only to cover EU law and policy, but also to make a comparison with other legal systems. In this respect, something noteworthy is taking place in the United States where, as of today, consumers’ access to financial data sharing has been largely dependent on private-sector efforts. Indeed, Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (passed in the aftermath of the financial crisis of 2008) provides that, subject to rules prescribed by the Bureau of Consumer Financial Protection (CFPB), a consumer financial services provider must make available to a consumer information, in its control or possession, concerning the consumer financial product or service that the consumer obtained from the provider. This provision, which dates back to 2010, has never been implemented. However, on 22 October 2020, the CFBP has announced its intention to regulate open banking, issuing an advanced notice of proposed rulemaking. In light of their investigation, the authors advocate the adaptation of the current strategies to the modified conditions and, in some instances, the creation of novel mechanisms, more suitable to face unprecedented threats.

The need for financial transparency is way beyond reducing fluctuations on financial markets, the protection of small investors or fighting against money laundering. Asian crisis in 1997, Dot-com bubble in 2000, company crises such as Enron and the global financial crisis in 2008 have shown that a crisis caused by the lack of transparency in companies might not only affect the company and its stakeholders in a negative way but also the country and the region the company is in. After the financial crisis of 2008 many countries made various arrangements in capital accounts about increasing transparency and accountability which was seen as one of the reason of the crisis in addition the short and long term precautions. Dodd–Frank Wall Street Reform and Consumer Protection Act which came into force in the United States in July 2010 is one of the most significant arrangements. In this study, practices of increasing transparency in capital markets after global financial crisis have been discussed. In this context, in light of the new regulations and the Corporate Governance Principles, transparency and disclosure practices in Turkey have been examined. The results of these practices have been analyzed in the short term and its possible effects on capital markets, companies and shareholders have been discussed in the long term. Increasing transparency has been expected to help financial markets process more effectively and to provide benefits to all stakeholders.