SEC Investor Advocate Rick A. Fleming asserted that the Dodd-Frank Act had been "successful in addressing some of the real causes of the financial crisis," particularly through its enhancement of regulations concerning asset-backed securities ("ABS"), derivatives and credit rating agencies.
In an address at the University of Maryland Robert H. Smith School of Business Center for Financial Policy, Mr. Fleming stated that the Dodd-Frank Act improved regulation in the following areas:
- Asset-Backed Securities. Mr. Fleming recounted that Dodd-Frank, Act Section 924 compelled the SEC to adopt revisions to rules governing the disclosure, reporting and offering process for various types of asset-backed securities, which enhanced transparency. He emphasized that these rules "enable investors to conduct due diligence to better assess the credit risk of asset-backed securities." Mr. Fleming also noted that the SEC joined with five other federal agencies in adopting credit risk retention rules that require those who securitize ABS to have "skin in the game" involving the securities that they package and sell.
- Derivatives. Mr. Fleming reported that Dodd-Frank Act, Title VII "established a comprehensive new framework for regulating the over-the-counter swaps markets and divided regulatory oversight between the CFTC and the SEC. He explained how the SEC has "established the majority of a comprehensive regulatory framework for the entire ecosystem of security-based swaps" ("SBS"), particularly through the implementation of Dodd-Frank Act, Section 764. Mr. Fleming indicated that the SEC "still has important work left" in order to "complete all the rules for securities-based swaps" – specifically, rules that will (i) govern SBS execution facilities, and (ii) set capital and margin requirements for SBS dealers and major SBS participants that are not banks.
- Credit Rating Agencies. Mr. Fleming cited the Financial Crisis Inquiry Commission's conclusion that credit rating agencies were "essential cogs in the wheel of financial destruction." He stated that the SEC adopted two basic sets of reforms that (i) address governance, accountability and the management of credit rating agencies by implementing fourteen Dodd-Frank Act mandates, and (ii) remove all references to credit ratings from its rules and forms, as mandated by Dodd-Frank, Section 939A. However, Mr. Fleming added, the SEC reforms "stop short of an outright ban on the conflict-of-interest model in which issuers pay for their own credit ratings."
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