Type of paper: Essay

Topic: Law, Finance, Banking, United States, Customers, Discipline, Business, Reforms

Pages: 10

Words: 2750

Published: 2021/02/25

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After the Great Recession in the late 2010's, there were few rules and most people relied on the big banks. The Dodd- Frank Act was formed during this time, and its main purpose was to deduct the federal dependence on these banks my giving them rules that were to be adhered to. This meant that they were going to no longer going to use the big banks. The Dodd-Frank Act was able to create Financial Stability Oversight Council (FSOC) whose role was to address the challenges facing the banking industry and curb another recession (Thomson 2013). Thomson (2013) further indicates that in the Act, the financial institutions are supposed to have plans for funerals so that in case if the bank collapses their money can still be accessed. Through this rules and strict security, the Dodd-Frank's Act does away with the likelihood of taxpayer-funded bailouts in the future.

The following are the major areas in the act:

Improving transparency
Enhancing the management of risks
Mandatory execution and clearance the goods that are covered
Enhancing integrity in business
Protection of consumers and the counterparty
According to Owens et al. (2011), the act did not only do this but also led to the formation of Consumer Financial Protection Bureau (CFPB). The CFPB ensures that members of the big unregulated financial institutions are protected. The CFPB combined the consumer protection benefits with a number of the available bureaus like the Department of Housing and Urban Development (DHUD), the National Credit Union Administration (NCUA), and the Federal Trade Commission (FTC). It also works in conjunction with regulators in these financial institutions to end and prevent business operations that are harmful to the consumers like lending in a risky manner. To add to the regulatory control, the CFPB gives customers the access to real information on mortgages and credit scores together with a twenty-four-hour toll-free consumer hotline to report any challenges them with financial services.

How the Dodd- Frank Work

The G20 in 2008 recommended a bill that allowed buyers and sellers who use over-the-counter (OTC) procedures manage their trades through a central counterparty (CCP). The U.S administration looked at the made recommendations through the Dodd-Frank Act. Later the Europeans followed suit in conjunction the European Market Infrastructure Regulation directive Cunningham, (2011).
In Canada, there were no securities to do the regulation in Canada, every individual provincial regulator will use the concepts set by the United States to make reformations. Although as at now there are no set guidelines yet. The consumers are likely to feel the consequences because the OTC has its origin in Canada are composed either U.S. or European counterparties. The Bank of Canada is also working in conjunction with the other six big banks to create a Canadian central counterparty solution. From 2012, the standardized swap contracts made by U.S. or European partners began to be cleared via a registered CCP like the Chicago Mercantile Exchange. Although not all CCP have been handling every which can be cleared contract type.

Rules of the Dodd- Frank Act

The Volcker Rule is one of the rules of the Dodd- Frank Act which is, named after former Federal Reserve Chairman Paul Volcker. The countries using this Act in business are still using this rules to this day although it core regulation was to cut down risky trading for banks and consumer deposits. This rule is said to be controversial.
There is also another rule of the Dodd – Frank Act known as the "Skin in the Game" rule. It actually adds risks in the law especially on the bank’s balance sheets. T is argued that these rules would have required the banks to maintain an exposure of 5% so that offloading can be done as well as taking into account the consumers dislikes and likes.

Dodd- Frank in Canada

As at now companies in Canada haven’t taken the American Dodd-Frank Wall Street Reform and Consumer Protection Act so. Maybe they should check on it with immediate effect, as the lawyers say on both sides of the border (Morrison, n.d.).
Evanoff and Moeller (2014) indicates that ever since the great 1200 bill was passed as law in the United States during summer, a lot of openings have been following the made rules under the leadership of the body of the United States Securities and Exchange Commission. The bill has had an effect on the Canadian financial industries listed on U.S. exchanges, although the other Canadian enterprises are also being affected by the bill too. Gratitude is given the wide interpretation of jurisdiction done by U.S. regulators, courts, Garrison LLP, and a collection of lawyers from an American law firm. For instance, the miscellaneous have been buried deeply due to disclosure provisions. As such, there are needs that are directly affecting significant industries in Canada such as the oil, gas and the mining industry says a Canadian, who is based in New York by the Andrew J. Foley. His work is to investigate Canadian issues.
The members of the Congress have been said to be keenly observing the Canadian economy at the time in which they were doing these provisions. This is because they have been using the overseas applications as Foley noted that it was a fundamental legislation that could impact greatly on Canadian firms. The main aim of Dodd-Frank is to help minimize the American banking system due to the financial crisis by attacking the financial risk, reining in derivate products, working on consumer security, and improving public company disclosures.
Despite this, the Dodd-Franc Act in Canada has advanced the United States jurisdiction in courts on the protection of transactions done on the outside as long as there is some commitment to the United States, which regulate how Canadians perform their business. Hui and Schoenmaker (2015) indicate that the acts regulations are drawing more attention in Canada. Everybody is given the freedom of acquiring about 10 to 15 percent of the funds that the regulators recover through the original knowledge that results in the recovery of above US$1 million.
The Act has also increased the disclosure provision challenge for Canadian firms in the sense that they can report payments they make to non-U.S. governments. But this part of the bill was made to keep cash away from the selfish and corrupt officials in the third world countries. According to Clowers and United States (2012), state those In-house formerly indicated Canadian firms with a role to report to the SEC may find themselves showing the money they produce to Canadian provinces or municipalities as well. Foley suggests, “Payments made to any foreign government will have to be disclosed. It’s extremely broad.” Hence in Canada, the regulations are still being looked at while at the same time other regulations are still in court getting tested. The firms in Canada have to be informed on the “Everything is still subject to change,” Foley adds.

Other Dodd-Frank provisions in Canadian industries

The United States Bill is forcing Canadian firms to operate their mine in America so that their safety regulations are changed. Globally, any firm doing mineral business that are gotten from the Democratic Republic of Congo and the countries around it needs to provide report because Congo is not financing the ongoing war there. The mines such as importantly cell phone element coltan are termed as “conflict minerals” by the government of United States (Chary, 2011). The U.S.-listed industries are now supposed to have an executive compensation for drawback

Dodd – Frank Act in Britain

Currently in Britain, the financial institutions like the banks are experiencing what china and china are facings. And so the lawyers are flooded I courts to question and push for the Dodd- Frank Act to be done away with (Chary, 2011). Certainly, Dodd-Frank Act together with its implementing regulations have dev eloped a profound impact on financial institutions. In Britain it is often referred to as swaps. The orderly liquidation authority or the financial stability oversight council has been in force to monitor stability of major firms. These are the firms whose failure can result to negative impact on the economy.
James Kruger who is a, global leader for legal matters at Macquarie Securities Group says, "Macquarie has most lawyers who are involved in derivatives change initiatives that are being taken away to various extents while basing on various timelines especially by the G20 countries. The projects suggested are larger than the lawyer’s management projects, operations, compliance, although lawyers must be there." For him, these are the main reasons, “it is quite obvious that there are many Asian bills within the G20 (Wallison, 2013). When one looks at Dodd-Frank, they need (a) regulatory lawyers for registration implications of entities located here for the swap dealings. The brokers need to be introduced and involved in the solicitation of these dealings, (b) there is the issue of documentation whereby lawyers observe protocols, questionnaires, reps and warranties, important entities, improved KYC prior to taking contacts (c) the lawyers should be structured in such a way that they can identify opportunities to consolidate the current market lines (Morrison, n.d.).

Dodd-Frank Legislation in China

In China, the Bill has not been received any different. It has been observed that Dodd-Frank is somehow killing the United States ABS slowly through their financial provisions. This is ironical that the regulations impact is a failure to the credit rating companies appropriately to assess the risk inherent in many structured finance goods. Cunningham, (2011), The Chinese people are now seeking help from the experts and later this was not the case. This advancement is due to the final version of the Dodd-Frank bill which to the beginning of the market’s misinterpretation.
For China, the rules set means that there is a need for manpower so that the regulations are met. The financial institutions will be required to improve their performances and comply with the risk management team to make sure that the regulations are observed to the latter. For instance, TCML most people are visiting them to find temporary OTC clearance for a specific period. Although this means that only temporary operations can be dealt with, and the permanent positions left out (Beckman & Greenwald, 2013).
Despite this, most banks are not allowing the new headcount because of constraints. The Headcount is also not being allowed because the short-term view of bankers that is continuous. They are only concerned with their personal gains through compensation. This is the way in which the act was meant to work. To add on this, by the time the act will have taken charge, those in charge of profit and loss may not be holding the same positions.
Morrison (n.d.) states that on the contrary, in the Private sector, the Act has proved to be lucrative from an advisory viewpoint and will lead to hike the work for litigators preventing banks from infringements of clearance disclosure provisions, proprietary trading, and the cases arising from the whistle-blowing provisions.
According to Beckman and Greenwald (2013), whether the set rules have improved the situation in China is undecided. Externally, it is observed that there are two possible results: one, it is either the financial rules are not effective and so the banks will find a way around them or to the trade in the overseas business will reduce and the financial institutions will face a challenge in making any gains. Cunningham (2011) states that this will lead to more job reduced cuts. Many are still arguing that the chances of another financial meltdown might occur immediately. This might be slim because very little has changed so far. In addition, the bill has mostly helped to preserve the status quo, rather than to make any significant improvement on Chinas situation (Chary, 2011).

The Dodd-Frank Act Prohibition

How to prepare: The financial institutions must be aware of the results of failure to adhere to these rules
Fixed margining
In the previous methods, the bilateral and collateral connections between groups the money was being negotiated with the country by looking at the investor credit-worthiness. CCPs allow require consistent collateral requirements across all market participants, regardless of their credit-worthiness.
Initial margin requirementtransactions should be subject to started and variation margin, as collateral will be marked to market several times a day.
Collateral requirements CCPs demand high-quality liquid initial margin. The difference in the margin needs to be cash. The consumers need service providers to change the non-CCP that delivers securities into cash and a valid initial margin.
Common creditThe beneficial consumer with better credit ratings, like pension funds, will enjoy better credit conditions with counterparties. In a making CCP transaction, all the beneficiaries have similar credit terms.
Trade portability Many financial institutional consumers are appointing many FCM to give a backup just in case a member is being cleared. Morrison (n.d.) indicates that although not every FCMs guarantee trade portability (shifting contracts from one consumer to another).

Penalties and recent case laws for Violation of "Dodd –Frank Act

Briefly these are the penalties for failure to adhere to the Acts regulations:
Mortgage lenders must seek to have financial records
The member countries are warned of payment in processors like checkpoint enforcement
Confidentialities agreed on cannot initiate whistleblowing
The court has the ability to give notices and comments on the rules
There are charges to be incurred
In keeping with Beckman et al. (2013), it should be noted that failure to observe the above prohibitions leads to penalties under the Real Estate Settlement Procedures Act ("RESPA") violations. In addition, Beckman et al. (2013) note that the disclosure provisions concerning the response to qualified written reports are only applicable to servicers, although private lenders who pay their mortgages can now find themselves in this trap as well.  Morrison (n.d.), the lenders, servicers and their guides must start having protocol so that they ensure that one of the Acts is working that no violations are done because refusal to comply is costly.
On the issue of deadlines, which goes as follows: a servicer has got 20 days that are not inclusive of legal public holidays and the weekends that are Saturdays and Sundays to approve a qualified report request on ("QWR")? According to Morrison (n.d), in the regulations provided, the days are reduced to five. The deadline of the QWR has also been reduced from 60 to 30 days. Although, might be increased to 15days as long as the one who borrowed notified and given a reason the delay is being experienced.
Shearman (n.d.) indicate that the rule is the servicer must establish an address that is only for QWRs if this has not been done yet. Under this regulation of the new RESPA rules allows a servicer to have an exclusive office and address for the purpose of handling receipts the receipt and handling of QWRs.  The address must be inclusive on the Notice of Transfer of Servicing or put aside and mailed to the borrower by faster means.  This will enable servicers to process the requests and to safeguard servicers from liability if the borrower sends the QWR to a wrong address.

Governmental Advisory Opinion for Future Conduct

After the global financial meltdown and $700 billion taxpayer-funded bailout, there has been a need for government advisory and reforms on the Act. Notably, the Act has not been in existence here for long and so there is no need for severe criticism and undermining its effectiveness. Whether the regulations set are intentionally misleading or just misguided, they are wrong about the law’s objective and consequences (Cunningham, 2012).
It has been criticized that Dodd-Frank Act is making the economy go down. The government arguing that the Critics are not remembering the real starter of their economic troubles. 2008 marked the toughest recession globally and so the financial bodies started lending money on credit, and this made the market to freeze making the banks to almost collapse (Hui & Schoenmaker, 2015).
According to Acharya et al. (2011), if Dodd-Frank Act was available then, the damage could not have occurred. Instead, economic woe brought about a recession; jobs were lost in America, and small business was closed down. It is now that we are still trying to nurse this trouble and hence complicating Americas Recovery. It still has a big debt but not Dodd – Franks challenge.
As at now, even though only 10 percent of Dodd-Frank’s disclosure provisions have been taken charge, critics are claiming that the law is perpetually killing jobs without knowing. Actually, it was the uncertainty inherent in a non-transparent and reckless financial system that made Dodd-Frank necessary in the beginning. The truth is that Dodd cannot prosper in a day. We can’t reform the situation if we allow false political talking points undermine our efforts to bring back the boldness and to trust our financial system (Hui & Schoenmaker, 2015).
With the many shortcomings, the Dodd- Frank Law is squarely aimed at better regulating the largest and most complex Wall Street firms: those that were most responsible for the crisis and still posing a challenge to date.


Acharya, V. V., Cooley, T., Richardson, M., Sylla, R., & Walter, I. (2011). The Dodd-Frank Wall Street Reform and Consumer Protection Act: Accomplishments and Limitations. Journal of Applied Corporate Finance. doi:10.1111/j.1745-6622.2011.00313.x
Clowers, A. N., & United States. (2012). Dodd-Frank Act: Agencies' efforts to analyze and coordinate their rules: report to congressional addressees. Washington, D.C.: U.S. Govt. Accountability Office. Retrieved from: www.gao.gov/assets/660/650947.pdf
Cunningham, W. M. (2012). The JOBS Act: Crowd funding for Small Businesses and Startups. Dordrecht: Springer. Retrieved from: https://books.google.co.ke/books?id=_ki98dpPksEC&printsec=frontcover&dq=The+JOBS+Act:+Crowd+funding+for+Small+Businesses+and+Startups&hl=en&sa=X&ei=wwMuVaK1I4jhaMOEgKAL&ved=0CCoQ6AEwAA#v=onepage&q=The JOBS Act%3A Crowd funding for Small Businesses and Startups&f=false
Evanoff, D. D., & Moeller, W. F. (2014). Dodd-Frank Wall Street reform and consumer protection act: purpose, critique, implementation status and policy issues. Retrieved from: https://books.google.co.ke/books?id=pITIfu1_D5gC&pg=PA213&dq=Dodd-Frank+Wall+Street+reform+and+consumer+protection+act:+purpose,+critique,+implementation+status+and+policy+issues.&hl=en&sa=X&ei=ogIuVYqqFZLvaIuygYgK&ved=0CCMQ6AEwAg#v=onepage&q=Dodd-Frank Wall Street reform and consumer protection act%3A purpose%2C critique%2C implementation status and policy issues.&f=false
Hui, H. R., & Schoenmaker, D. (2015). The institutional structure of financial regulation: Theories and international experiences. Retrieved from: https://books.google.co.ke/books?id=Jr3cAwAAQBAJ&printsec=frontcover&dq=The+institutional+structure+of+financial+regulation:+Theories+and+international+experiences.&hl=en&sa=X&ei=5wIuVceKJ4LjaoKrgJgF&ved=0CBwQ6AEwAA#v=onepage&q=The institutional structure of financial regulation%3A Theories and international experiences.&f=false
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Morrison, F. (n.d.). The Dodd-Frank Act:a cheat sheet. Retrieved from http://media.mofo.com/files/uploads/images/summarydoddfrankact.pdf
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Shearman, S. (n.d.). Dodd-Frank, UK, EU & Other Regulatory Reforms | Key Issues | Shearman & Sterling LLP. Retrieved from http://www.shearman.com/en/services/key-issues/doddfrank-uk-eu--other-regulatory-reforms
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Wallison, P. J. (2013). Bad history, worse policy: How a false narrative about the financial crisis led to the Dodd-Frank Act. Washington, DC: American Enterprise Institute for Public Policy Research. Retrieved from: http://object.cato.org/sites/cato.org/files/serials/files/cato-journal/2014/5/cato-journal-v34n2.pdf
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