Lawmakers Continue Focus on Dodd-Frank, CFTC and SEC Propose Rule

Lawmakers Continue Focus on Dodd-Frank, CFTC and SEC Propose Rules

, Mara C. Giorgio of Squire Patton Boggs (US) LLP - Capital Thinking Blog

Monday, July 6, 2015

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Legislative Activity

Lawmakers Continue Focus on Dodd-Frank

With Senate Banking Committee Chairman Richard Shelby’s (R-AL) “resting,” this week the House Financial Services Committee will hold a hearing to evaluate the current status of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Later this month, the Senate Banking Committee will hold a hearing on reforming the Financial Stability Oversight Council (FSOC) – one of the many areas of reform Republicans would like to see addressed.

This Week’s Hearings:

Wednesday, July 8: The House Financial Services Subcommittee on Financial Institutions and Consumer Credit will hold a hearing titled “Examining the Designation and Regulation of Bank Holding Company SIFIs.”
Wednesday, July 8: The Senate Banking Committee will hold a hearing titled “The Role of the Financial Stability Board in the U.S. Regulatory Framework.”
Thursday, July 9: The House Financial Services Committee will hold a hearing titled “The Dodd-Frank Act Five Years Later: Are We More Stable?”

Regulatory Activity

CFTC Proposes International Collateral Rule, To Hold Roundtable on MAT Process

Last week, the Commodity Futures Trading Commission (CFTC or Commission) voted unanimously to propose a rule that would apply the CFTC’s margin requirements for uncleared swaps in the context of cross-border transactions to registered swap dealers and major swap participants that are not subject to the margin requirements of other prudential regulators. Under the proposed rule, covered swap entities would be required to comply with the Commission’s margin rules for all uncleared swaps in cross-border transactions, with a limited exclusion. In addition, the proposed rule would allow covered swap entities to comply with comparable margin requirements in a foreign jurisdiction as an alternative means of complying with the Commission’s margin rules for uncleared swaps (substituted compliance). The CFTC will accept public comments on the proposed rule for 60 days after its publication in the Federal Register.

Additionally, the CFTC’s Division of Market Oversight has announced that it will hold a public roundtable on July 15 to discuss the Commodity Exchange Act’s trade execution requirement and the process of making Made Available to Trade (MAT) determinations. The roundtable will discuss: (1) approaches to mandatory exchange trading in various jurisdictions; (2) academic perspectives on, and data-based assessment of, MAT; and (3) industry analysis of the MAT process.

SEC Proposes Rules on Clawback Policies on Executive Compensation, Launches ReTIRE Program

The Securities and Exchange Commission (SEC) last week formally proposed rules directing national securities exchanges and associations to establish listing standards requiring companies to adopt policies that require executive officers to pay back incentive-based compensation that was awarded erroneously. In proposing these rules, the SEC has issued all proposals regarding executive compensation that are required by the Dodd-Frank Act. Following their publication in the Federal Register, the public will have 60 days to comment on the proposed rules.

Additionally, the SEC has launched the Retirement-Targeted Industry Reviews and Examinations (ReTIRE) program under which examiners will focus on “certain higher-risk areas of registrants’ sales, investment, and oversight processes, with particular emphasis on select areas where retail investors saving for retirement may be harmed.” The program will also ensure that firms are making appropriate recommendations for retirees and disclosing necessary conflicts. Notably, this program is being rolled out as the SEC moves forward with developing its version of the “Fiduciary Rule” in light of the Department of Labor’s recently re-proposed rule which specifically seeks to establish a new legal standard for brokers and require them to offer investors retirement advice that is in the investors’ best interest.

CFPB Delays Mortgage Disclosure Rules

As a result of an “administrative error…in meeting the requirements under federal law,” Consumer Financial Protection Bureau (CFPB) has formally proposed an extension for compliance with certain loan disclosure rules. Pursuant to the proposal, mortgage lenders will now have until October 1 to comply with the requirements of the CFPB’s loan disclosure framework.

Fannie and Freddie Issues New Capital Requirements for Lender Paid Mortgage Insurance

Last week, in conjunction with the Federal Housing Finance Agency (FHFA), government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac notified lenders of revised Private Mortgage Insurer Eligibility Requirements (PMIERs), which require them to incorporate higher capital requirements for loans with Lender Paid Mortgage Insurance (LPMI). According to the GSEs, “[t]he adjustments in the [Private Mortgage Insurer Eligibility Requirements] update establish minimum required asset amounts that appropriately reflect that longer horizon and ensure [the GSEs’] mortgage insurance providers are strong counterparties for the future.”