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Wall Street Reform Act Summary


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Points taken from CCH article on the Dodd-Frank Wall Street Reform and consumaer Protection Act

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Wall Street Reform Act Summary

  1. 1. Wall Street Reform Act Dodd-Frank Wall Street Reform and Consumer Protection Act: July 21, 2010 Points from CCH Article “Financial Reform Legislation enacted in United States – Includes Permanent Exemption from SOX Section 404(b) for Certain Smaller Companies”
  2. 2. Public Companies with < 75 Million in Market Capitalization <ul><li>Permanently exempt from SOX requirement for external audit on internal controls </li></ul><ul><ul><li>Still required to disclose management attestation on internal controls </li></ul></ul><ul><li>SEC to study public companies between 75 and 250 Million in market capitalization too see if their burden can be reduced as well </li></ul>
  3. 3. Executive Compensation <ul><li>Shareholders get a “say in pay” </li></ul><ul><ul><li>For Executive Pay </li></ul></ul><ul><ul><li>For “Golden Parachutes” </li></ul></ul><ul><ul><li>Nonbinding vote still gives executives some accountability </li></ul></ul><ul><li>Set policies to take back executive compensation if financial statements are restated (due to noncompliance with reporting standards) </li></ul><ul><li>Gives SEC authority to give shareholders proxy access to nominate directors </li></ul>
  4. 4. EXECUTIVE COMPENSATION (continued) <ul><li>If Company is listed on an exchange </li></ul><ul><ul><li>Compensation committees </li></ul></ul><ul><ul><ul><li>Must have only independent directors </li></ul></ul></ul><ul><ul><ul><li>Given authority to hire compensation consultants to strengthen independence from executives who stand to gain or lose from their decisions. </li></ul></ul></ul>
  5. 5. <ul><li>SEC must </li></ul><ul><ul><li>Clarify disclosures related to compensation </li></ul></ul><ul><ul><ul><li>Including companies providing charts to compare executive compensation with stock performance over a 5 year period </li></ul></ul></ul><ul><ul><li>Adopt rules requiring companies to disclose why the CEO and Chairman of the Board are or are not chosen to remain </li></ul></ul><ul><ul><ul><li>To disclose in annual proxy sent to shareholders </li></ul></ul></ul>EXECUTIVE COMPENSATION (continued)
  6. 6. Additional SEC Powers <ul><li>Authority to bar securities professionals who commit fraud from entering another sector </li></ul><ul><li>Can bring action against those who aid and abet securities fraud </li></ul><ul><ul><li>Increased from existing power in civil enforcement cases </li></ul></ul><ul><ul><li>Further clarifies Investment Advisors Act of 1940: Aiding and abetting claim can be based on reckless behavior </li></ul></ul><ul><ul><li>Following further study, SEC may issue rule that any financial intermediary who also gives personal investment guidance is legally obligated to act in the best interest of the client </li></ul></ul>
  7. 7. Other Provisions <ul><li>New Positions & Units in SEC </li></ul><ul><ul><li>Includes “Investor Advocate” to oversee Whistleblower program </li></ul></ul><ul><li>PCAOB - Authority over Broker-Dealers </li></ul><ul><ul><li>Auditors of Broker-Dealers to register with PCAOB </li></ul></ul><ul><ul><ul><li>Subject to program of inspection developed by PCAOB </li></ul></ul></ul><ul><ul><ul><ul><li>To differentiate by classes: Auditors of Broker-Dealers who do not carry client assets to be exempt </li></ul></ul></ul></ul><ul><li>Establishes “Financial Stability Oversight Council” </li></ul><ul><ul><li>Monitors financial regulatory developments and advises congress </li></ul></ul>
  8. 8. Other Provisions – Continued <ul><li>Improving reporting for asset-backed securities </li></ul><ul><ul><li>Consistent standards for formatting data </li></ul></ul><ul><ul><li>Unique ID for loan originators & brokers </li></ul></ul><ul><ul><li>Disclose nature & extent of compensation of broker or originator </li></ul></ul><ul><ul><li>Amount of risk retained by originator </li></ul></ul><ul><ul><li>Federal Reserve & SEC to study effect of each class of asset backed security from credit risk retention requirements in this act and in FASB topics 860 (transfers & servicing) and 810 (Consolidation) </li></ul></ul>
  9. 9. Other Provisions – Continued <ul><li>More oversight of Credit Rating Agencies </li></ul><ul><li>New authorities to dissolve & liquidate a failing financial institution (no more “too big to fail”) </li></ul><ul><li>Establishes new “Bureau of Consumer Financial Protection” </li></ul><ul><ul><li>Establish Federal Standard for all home loans </li></ul></ul><ul><ul><li>Lenders prohibited from unfair lending practices </li></ul></ul><ul><ul><li>Creates process to shut down large financial firms whose collapse would put the economy at risk </li></ul></ul><ul><ul><ul><li>(ends taxpayer bailouts) </li></ul></ul></ul>
  10. 10. Other Provisions – Continued <ul><li>Establishes new “Volker Rule” </li></ul><ul><ul><li>Limits the amount of money banks can invest in hedge funds </li></ul></ul><ul><li>U.S. Treasury credit line increased from $1Billion to $2.5Billion </li></ul><ul><li>Regulation of Hedge Funds and OTC Derivatives </li></ul><ul><ul><li>To stop excessive risk taking and other irresponsible practices </li></ul></ul><ul><li>Karen Kay </li></ul><ul><li>July 26, 2010 </li></ul><ul><li>Grantham Poole CPA’s </li></ul>