In response to a petition filed by the Business Roundtable and the U.S. Chamber of Commerce with the U.S. Court of Appeals for the District of Columbia Circuit asking the Court to vacate recent changes to the SEC’s proxy rules designed to facilitate shareholder nomination of directors (as discussed in the September 1, 2010 Goodwin Procter Client Alert and the September 7, 2010 Alert), the SEC has issued an order staying the effectiveness of newly adopted Rule 14a-11, related amendments to the proxy rules and amendments to Rule 14a-8, pending the Court’s review.

The FDIC Board of Directors issued a proposed rule (the “Proposed Rule”) to implement Section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) that provides temporary unlimited deposit insurance coverage for noninterest-bearing transaction accounts.  The separate coverage for noninterest-bearing transaction accounts becomes effective on December 31, 2010, and terminates on December 31, 2012.  The Proposed Rule also serves as formal notice that the FDIC will not be extending the Transaction Account Guarantee Program (“TAGP”) beyond its scheduled expiration date of December 31, 2010.  Comments are due on the Proposed Rule by October 15, 2010.  The FDIC noted that the shorter than usual comment period is necessary to give insured depository institutions adequate time to implement the notice and disclosure requirements set forth in the proposed rule by December 31, 2010. [Read more →]

The OTS issued an updated Examination Handbook Section on Capital Adequacy (“New Section 120”), providing extensive revisions from the previous version.  Changes include, among other things, (1) an expanded discussion on assessing compliance with minimum regulatory capital requirements, and (2) updates on the Basel International Accord.  New Section 120 also significantly expands the discussion on assessing overall capital adequacy to include: (a) a review of an institution’s own capital adequacy assessment process; (b) factors that affect capital, including material risks; (c) an assessment of the quality of capital; and (d) an assessment of capital adequacy relative to an institution’s unique risk profile. [Read more →]

The FDIC’s Board of Directors approved a final rule (the “Final Rule”) that will extend through December 31, 2010 safe harbor protection for applicable securitizations and participations in the event of an FDIC-insured bank’s failure.  The Final Rule is similar to the FDIC’s extension of the safe harbor on March 11, 2010.  For a discussion of the safe harbor and its extensions, see the June 16, 2009 Alert, the November 17, 2009 Alert and the March 16, 2010 Alert.  A detailed discussion of the Final Rule will appear in a future issue of the Alert.

Treasury Secretary Tim Geithner, Chairperson of the Financial Stability Oversight Council (the “FSOC”) established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, announced that the FSOC would hold its first meeting on October 1, 2010 in Washington D.C.  The press release announcing the meeting stated that the FSOC will provide, “comprehensive oversight over the stability of our nation’s financial system.  [The FSOC] is charged with identifying threats to the financial stability of the United States; promoting market discipline by eliminating expectations on the part of shareholders, creditors, and counterparties that the government will shield them from losses in the event of failure; and responding to emerging risks to the stability of the United States financial system”.

Elizabeth Warren has been appointed Assistant to the President and Special Advisor to the Secretary of the Treasury for the Bureau of Consumer Financial Protection (“CFPB”).  In this role, Ms. Warren will be charged with establishing the CFPB, which was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) to regulate consumer financial products and services under the federal consumer financial laws.  Ms. Warren is a Harvard Law School professor and is widely credited with originally proposing the creation of a consumer protection agency.  Until the announcement of her appointment as special advisor, Ms. Warren chaired the Congressional Oversight Panel that oversees the Troubled Asset Relief Program.  [Read more →]

The SEC website includes a page devoted to the SEC’s efforts in implementing applicable portions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (as discussed in the July 28, 2010 Alert).  The Dodd-Frank webpage includes information on the timing of upcoming rulemaking and SEC action to date.  The webpage also includes overviews of rulemaking required under the Act in the following areas:

• Derivatives
• Clearing and Settlement
• Asset-Backed Securities
• Advisers to Hedge Funds and Other Private Funds
• Whistleblower Program
• Corporate Governance Issues, Including Executive Compensation Disclosure and Related SRO Rules
• Municipal Securities
• Credit Rating Agencies
• Specialized Corporate Disclosure

The SEC announced that it has approved rule proposals submitted by the national securities exchanges and FINRA that expand a recently-adopted circuit breaker program (discussed in the June 15, 2010 Alert) to include all stocks in the Russell 1000 Index and certain exchange-traded funds.  The SEC anticipates that the national securities exchanges and FINRA will begin implementing the expanded circuit breaker program this week.  The SEC also approved new rules proposed by the stock exchanges and FINRA designed to clarify the process for reviewing trades in exchange-traded securities to determine whether they are clearly erroneous and should be cancelled (as discussed in the June 22, 2010 Alert).   As with the circuit breaker program, the final erroneous trade rules will be in effect on a pilot basis through December 10, 2010.

In his keynote address for the ISDA Regional Conference in New York City, CFTC Chairman Gary Gensler discussed the CFTC’s efforts to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) with regard to regulation of the swaps marketplace.  Chairman Gensler estimated that more than 200 entities will register as swap dealers and 20 to 30 new entities will register as swap execution facilities or designated contract markets as a result of the Dodd-Frank Act and the rules being promulgated by the CFTC and SEC.  Gensler noted that the CFTC is actively working with international regulators to harmonize swaps market oversight.  Citing to the European Commission’s proposed legislation on over-the counter derivatives released on September 15 2010, Chairman Gensler stated his confidence in “strong and consistent regulation of the U.S. and European swaps market.”  For further discussion of swaps marketplace regulation under Title VII of the Dodd-Frank Act, see the August 2, 2010 Special Edition of the Alert).

Following the publication of two Commission Communications in July and October 2009, the European Commission issued its “Proposal for Regulation of the European Parliament and of the Council on OTC derivatives, central counterparties and trade repositories” on September 15, 2010.  (The text of the proposed legislation is available at http://ec.europa.eu/commission_2010-2014/barnier/headlines/news/2010/09/20100915_en.htm.)  Like Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the proposed legislation is intended to promote transparency in the OTC derivatives market, reduce counterparty credit risk and reduce operational risk.  Specifically, the proposed legislation would, among other things, mandate clearing for standardized OTC derivatives through central counterparties (“CCPs”).  To avoid CCPs becoming a source of risk to the financial system, the new regime would impose stringent conduct of business and prudential requirements on CCPs.  It would also increase transparency by requiring heightened reporting on OTC derivatives to trade repositories and that such information be accessible to supervisory authorities.  The European Council and the European Parliament must approve the proposal before it becomes law.

The Basel Committee on Banking Supervision (the “Basel Committee”) announced that the Group of Governors and Heads of Supervision, the oversight body of the Basel Committee, agreed on new, higher capital standards for banking organizations at its meeting on September 12, 2010.  The President of the European Central Bank and Chairman of the Group of Governors and Heads of Supervision, Jean-Claude Trichet, noted that “the agreements reached today are a fundamental strengthening of global capital standards,” and that “their contribution to long term financial stability and growth will be substantial.”

The new standards will include a minimum common equity requirement of 4.5% (compared to the current requirement of 2%).  The phase-in period for this requirement will begin on January 1, 2013, with full implementation effective January 1, 2015.  The Tier 1 capital requirement, which includes common equity and other qualifying financial instruments, will increase from 4% to 6% over the same period.  The total capital requirement will remain at the existing level of 8%, and therefore will not need to be phased in. [Read more →]

Below is a link to a Client Advisory (“Dodd-Frank Wall Street Reform and Consumer Protection Act – Public Company Impact”) prepared by Goodwin Procter’s Securities & Corporate Finance and ERISA & Executive Compensation Practices.

Dodd-Frank Wall Street Reform and Consumer Protection Act - Public Company Impact

Below is a link to a Client Alert (“Private Fund Investment Advisers Registration Act of 2010 Signed Into Law”) prepared by Goodwin Procter’s Private Investment Funds and Hedge Funds Practice.

Private Fund Investment Advisers Registration Act of 2010 Signed Into Law

The U.S. House of Representatives approved the conference report on the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) by a vote of 237-192.  For a discussion of the Act, please see the June 29, 2010 Alert.  The Act will now be voted upon by the Senate, where its chances of approval are regarded as good, but less than certain.  The Act has been primarily supported by Democrats and with the death of Senator Robert Byrd there are only 58 Democratic senators; 60 votes are needed to end debate on the Act.  The governor of West Virginia may appoint a successor to Sen. Byrd before the Senate returns from its Fourth of July recess on July 12.  Of the two Democratic senators who did not vote for the previous Senate financial reform bill, Sen. Maria Cantwell has stated that she will vote for the Act and Senator Russ Feingold has stated that he will not vote for the Act.  Republican Senator Susan Collins, who voted for the previous Senate financial reform bill, has also stated that she will vote for the Act.  The three other Republican senators who voted for the previous Senate financial reform bill, Sens. Olympia Snowe, Scott Brown and Charles Grassely, have not indicated whether they will vote for the Act.

The Congressional conference committee on financial regulatory reform released its 2,319 page conference report reconciling the Wall Street Reform and Consumer Protection Act of 2009 that was passed by the U.S. House of Representatives on December 11, 2009 (the “House Bill”) with the Restoring American Financial Stability Act of 2010 that was passed by the U.S. Senate on May 20, 2010 (the “Senate Bill”).  The final legislation, which was renamed by the conference committee the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), would comprehensively reform the regulation of financial products and services by providing for, among other things, the establishment of a Financial Stability Oversight Council (the “Council”) to monitor systemic risk, the creation of a new resolution process for systemically important financial institutions, the establishment of a Consumer Financial Protection Bureau (the “CFPB”), the registration of private fund advisers and the regulation of derivatives.

After releasing its conference report, the conference committee reconvened to revise the funding provisions of the Act to address concerns regarding a proposed assessment on large financial institutions.  The conference committee agreed to replace the proposed assessment with provisions that would authorize (i) the early termination of the Troubled Asset Relief Program and (ii) require the FDIC to take steps to increase the reserve ratio of the Deposit Insurance Fund from 1.15 percent to 1.35 percent of estimated insured deposits by September 30, 2020, provided that any increased assessment must not be applied to institutions with less than $10 billion in assets. [Read more →]