GAO Says Most Financial Regulators Don’t Have the Procedures/Policies to Coordinate Dodd-Frank Rules

According to a recent Government Accountability report, the majority of regulators don’t have the formal procedures and policies needed to coordinate with each other on the interagency rules that the Dodd-Frank Wall Street Reform and Consumer Protection Act is requiring. As of earlier this month, regulators had reportedly coordinated on just 19 of the 54 substantive regulations that the GAO had examined. The GAO’s report is the yearly review that is required by Congress of how well Dodd-Frank is being implemented.

Per the Act, interagency consultation and coordination on specific rules has to take place. Coordination is also occurring when at least two regulators work together of their own volition to eliminate regulation overlap or duplication.

Yet, said the GAO, seven of nine agencies don’t even have written procedures and policies to facilitate rulemaking coordination. The two that do are the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation. One agency that has made some progress in this matter since last year is the Consumer Financial Protection Bureau.

While federal financial regulators are coordinating informally on other aspects of Dodd-Frank, the GAO said this type of coordination might not get rid of differences in certain related rules. Also, the majority of interagency coordination has been taking place at the staff level.

According to the report, it appears common for formal interagency meetings to occur during the early stages of the rulemaking process, with phone conversations, email, and one-on-one dialogue taking place when the rules are being drafted. The degree of interagency coordination appears to vary depending on the rule.

Referring to the way the Commodity Futures Trading Commission and the Securities and exchange Commission met often until the final swaps entities rule was published (and how afterwards differences were worked out with the help of public comments in an attempt to find consensus), the GAO said that even though such consultations frequently garnered results, there are still significant remaining differences, which can be attributed to each agency’s respective market, product type, or regulatory jurisdiction.

For example, with the swap entities rule, in certain parts the regulators delineated different approaches because of their jurisdictions. As for the real-time reporting rule, while the SEC’s proposal outlined broad data categories and mandated that swap data repositories develop clear reporting protocols, the CFTC defined the data fields that needed to be reported.

Finally, the GAO’s report concluded that the full effect of Dodd-Frank is not yet clear. Even as federal agencies keep implementing the financial reform law, less than 50% of the rules that are required have been issued and not enough time has taken place to assess the effect of the rules that are working and final.

At Shepherd Smith Edwards and Kantas, LTD, LLP, our institutional investment fraud lawyers represent clients throughout the US.

GAO Report (PDF)

Dodd-Frank Wall Street Reform and Consumer Protection Act

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