The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law by President Obama on July 21, 2010. Now, we are in the midst of a rulemaking process that is designed to ensure a broad range of issues and detailed expertise – industry, economic, scientific and consumer – are incorporated at various stages. The end goal of this process is to ensure final regulations are balanced, consistent with the intent of the initial legislation, and avoid any potential unintended consequences.
The Dodd-Frank mandate is the largest in generations: 235 rulemakings, already generating 41 reports, 71 studies authored by 11 different federal agencies and bureaus. Much work has been already done, 162 new rules have been finalized. But, we still have a long road ahead of us. 170 deadlines have been missed. 110 rules have yet to be proposed.
Regulators are faced with a daunting task of implementing Dodd-Frank. To complicate matters, multiple regulators have joint jurisdiction over the same markets and products.
The Regulatory Agencies
The Rulemaking Process
Three-Part Video Series on The Rulemaking Process
At least a dozen regulatory agencies will be involved in the Dodd-Frank rulemaking process, each of which will take the lead in drafting the new regulations they have been assigned. In some cases, there may be a joint rulemaking between two or more agencies.
The agency may begin the rulemaking process by publishing an initial analysis, conducting studies, asking for early public comment or may undertake a more informal process of gathering public input.
In order to identify the potential impact a proposed rule could have on interested parties, such as small businesses and state and local governments, the agency must perform an initial analysis of the rule. They must estimate the costs and benefits of the rule, as well as analyze possible alternatives to the rule. The analysis is submitted to the Office of Information and Regulatory Affairs (OIRA). This review process is often done before proposed rules are made available for public comment.
At this point, the agency will draft a rule and may request public comment. To ensure different viewpoints are represented, public input is welcomed from groups such as academics, consumers, industry participants and economists.
- Rulemaking with Notice and Comment: Here, the agency will issue a proposed rule and solicit public comment. Typically, the public comment period remains open for 30 to 60 days following publication of a notice seeking public comment in the Federal Register. The comment period may last longer, depending on the complexity of the proposed rule. During the public comment period, anyone may submit a comment on any part of the proposed rule. This process is not a vote on the proposed rule. Each agency must review all comments carefully and provide a response. Based on the data, policy arguments, questions or criticisms raised, the agency can decide to make additional changes to the proposed rule. The agency is also responsible for coordinating with any other agency that may be responsible for issues covered by the proposed rule.
- Direct Final Rulemaking: Alternatively, the agency may issue a direct final rulemaking if the rule is routine or non-controversial. Direct final rulemaking is a shorter process in which the agency publishes the rule as a “direct final rule,” rather than a “proposed rule,” in the Federal Register. The process also states that, unless it receives negative comments, the rule will become final shortly after the comment period ends.
- Rulemaking without Notice and Comment: The U.S. government, through the Administrative Procedure Act, allows some proposed rules to become final without going through the notice and comment process. Such proposed rules include: interpretive rules, which explain how the agency interprets existing rules or statutes, but don’t set new legal standards; rules that set agency procedure; and rules in circumstances when the notice and comment process would be impracticable or unnecessary to the public interest.
Once the notice and optional comment process is complete, the agency may choose to:
- STOP the rulemaking, at least for now. It may publish that decision in the Federal Register, or do nothing;
- CHANGE the proposed rule. If the agency does this, it must begin a second notice and comment period so the public has the opportunity to react to the changes; or
- ADOPT the proposed rule as its final rule. This can be done by deciding to keep the proposed rule unchanged or without major changes.
If the rule is adopted, it must be published in the Federal Register along with a statement of its origin and purpose. An effective date will be announced to give regulated parties an opportunity to comply with the new rule.
The financial industry has long been supportive of financial regulatory reform and has served as a productive participant in the process. SIFMA, on behalf of its members, continues to work with legislators and regulators to implement the Dodd-Frank Act through the rulemaking process. However, the regulatory push has been excessive in some instances.
Five years after the crisis, our financial firms and markets are safer and stronger. Capital holdings by firms have increased and leverage decreased substantially. Too big to fail has largely been addressed by new requirements such as living wills and orderly liquidation authority.
SIFMA continues to believe implementation must uphold the original spirit and intent of the legislation to safeguard our financial system, without constraining capital formation, credit availability, and the financial industry's ability to contribute to economic growth and job creation. While our financially regulatory reform is not complete, we must ensure that what remains is done right, to ensure our markets can function efficiently and play their role providing fuel to the engine of the global economy.
SIFMA's Rulemaking Priorities
SIFMA is focused on six priority areas related to the Dodd-Frank Act that our members have identified as critical issues:
- Systemic Risk Regulation
- Resolution Authority
- Volcker Rule
- OTC Derivatives
- Fiduciary Standard
- Housing Finance Reform
SIFMA representatives from business policy, legal and government affairs have been assigned to manage SIFMA's day to day efforts on both priority issues and all other relevant rulemakings. In addition, SIFMA has established a Dodd-Frank Rulemaking Oversight Coordinating Committee (ROCC) comprised of those individuals assigned by the major firms along with regional and asset management firm representation to coordinate such activities.