On June 17, 2009, President Obama announced proposals that may lead to sweeping changes in the regulation of the nation's financial industry. President Obama was careful to point out that restoring integrity to the American financial markets was a prime goal of this new plan. In conjunction with the President's remarks, the United States Department of theTreasury released a 101-page document entitled, Financial Regulatory Reform A New Foundation: Rebuilding Financial Supervision and Regulation ("FRR Report").
The FRR Report is divided into five key objectives: financial firm supervision and regulation; financial market comprehensive regulation; consumer and investor protection; empowering regulators to manage future financial crises; and international regulation.
In particular, the FRR Report provides broad proposals in the area of financial firm supervision and regulation. These include, among other things, hedge fund and investment manager registration; the creation of a new council to identify new risks and improve cooperation among the various agencies; providing new authority to the Federal Reserve Board ("FRB") to supervise all financial firms regardless if they are banks; stronger capital and risk requirements for all financial firms; a new national bank supervisor for all federally chartered banks; and the elimination of various loopholes in the banking system.
The FRR Report also states that our financial markets must be able to withstand "system-wide stress" and multiple financial institution failures. The FRR Report indicates that, to ensure such a goal, enhanced and comprehensive supervision must exist. To that end, the FRR Report proposes that enhanced regulations involve new requirements for market transparency; credit agency regulation; and forcing issuers and originators of securitized loans to have a financial interest in the products. Further, all over-the-counter derivatives will be regulated, and the FRB will have oversight authority over payment, clearing and settlement systems.
The President's plan will also include new protections for consumers and investors. A new "Consumer Financial Protection Agency" will be established, but will not be allowed to tread upon financial products under SEC or CFTC regulations. Consumers and investors will also see new regulations to improve various aspects of their relationships with providers of consumer and investor products and services as well as initiatives to level the playing field between these parties.
Additionally, the FRR Report states that there will be new regulations to provide the government with the "tools" to act in future crises. Proposals relating to a new method to resolve non-bank failures and emergency lending will be attempted. Finally, the government will work towards international reforms to buttress the new undertakings at home in an effort to ensure that future problems do not spread across global markets.
In sum, Fox Rothschild LLP anticipates that the FRR Report will serve as the basis for future debate on these and other issues as we move forward. Accordingly, our attorneys will be preparing various client alerts to discuss in depth aspects of the FRR Report as well as the issues and challenges presented by this new regulatory approach. The attorneys of Fox Rothschild LLP will continue to monitor developments and are prepared to assist you with any changes to the regulatory framework of the financial industry.
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