President Obama has signed the sweeping financial regulatory reform bill into law after a year of pushing the legislation through Congress.
The bill contains a vast array of provisions governing the financial industry, including the creation of a Bureau of Consumer Financial Protection within the Federal Reserve and the ability to close down failing financial institutions that threaten the economy.
Because of this law, the American people will never again be asked to foot the bill for Wall Streets mistakes, said Obama. There will be no more taxpayer-funded bailouts, period. If a large financial institution should ever fail, this reform gives us the ability to wind it down without endangering the broader economy. And there will be new rules to make clear that no firm is somehow protected because it is 'too big to fail,' so we don't have another AIG.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, named after Senate Banking Committee Chairman Christopher Dodd, D-Conn., and House Financial Services Committee Chairman Barney Frank, D-Mass., also contains provisions requiring that many over-the-counter derivatives and swaps be traded and cleared on regulated exchanges, giving shareholders a non-binding say on the pay of high-ranking corporate executives, and restricting the proprietary trading of banks in derivatives with their own capital. Credit ratings agencies need to establish and document the internal controls for the methodologies they use to determine credit ratings for companies.
The bill expands the authority of the the Public Company Accounting Oversight Board to regulate auditors of brokers and dealers by providing them with standard-setting, inspection and disciplinary authority regarding broker-dealer audits. It also allows the PCAOB to share information with foreign auditor oversight authorities under certain circumstances.
In addition, the bill exempts smaller public companies with a market cap of under $75 million from Sarbanes-Oxley Section 404(b) audits of management's assessment of internal controls. CPAs and tax preparers are exempted from regulation by the Bureau of Consumer Financial Protection, and CPAs may be called upon to assist in audits of the bureau by the U.S. comptroller general.
The bill also calls for a number of studies to be conducted by the Securities and Exchange Commission, including one that the SEC and the comptroller general would conduct over the next nine months to determine how the SEC could reduce the costs of complying with Section 404(b) for companies whose market capitalization is between $75 million and $250 million while maintaining investor protection.
Other provisions amend the aiding and abetting provisions of the securities laws to allow the SEC to seek monetary damages from any person who recklessly has aided, abetted, counseled, commanded, induced or procured a violation of the act or rules.
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