Financial Regulatory Reform

After significant controversy, debate and compromise, President Obama signed the landmark financial regulatory reform legislation, the Dodd-Frank Wall Street Reform and Consumer Protection Act, into law.
 
With more Republican power in Congress, financial regulatory reform faces an uncertain future, with many provisions facing revisions or repeal.

Highlights of the Dodd-Frank Act

Consumer Financial Protection Agency: CPAs are exempt from oversight of the new regulatory body when they provide usual and customary accounting services. Without this critical exemption, CPAs who provide financial planning, tax planning, tax return preparation and financial literacy education to consumers would be subject to new and duplicative regulation from the new bureau.

Aiding and abetting: The amendment to broaden the reach of trial attorneys was not included in the final bill.  The bill includes a GAO study of the potential effects of the aiding and abetting standard.

Sarbanes-Oxley Section 404(b): The bill includes an exemption from audits of internal controls for publicly-traded companies with a market capitalization below $75 million, although the profession had supported continued inclusion so that investors in all public companies would get the same protections.  

Independence of standard-setting: FASB maintains its independent standard-setting process, despite efforts to include specific legislative mandates in the reform package.

Securities lawsuits: Fortunately, a study replaced an amendment to overturn a Supreme Court decision issued in June that could have encouraged the filing of securities lawsuits in U.S. courts. OSCPA will monitor this issue as studies can translate into legislation.

Financial Regulatory Reform news

  • Dodd-Frank Act and Basel III Accord creates a short-term investment opportunity

    Feb 06, 2012
    Buried in the recent Dodd-Frank Act (July 21, 2010) are a series of sections known as The Collins Amendment. In particular, Section 171 (b)(4)(c) addresses banks and thrifts of a certain size (over $15 billion in consolidated assets) are required to meet certain minimum leverage and risk-capital requirements on Tier 1 capital. The amendment’s intent is to improve the quality of Tier 1 capital and also equalize capital requirements for large and smaller bank holding companies alike. The Collins Amendment is to be phased in over a three year period beginning January 1, 2013 for debt and equity instruments issued before May 19, 2010; effectuating a probable call period or feature for the affected securities that have call provisions.
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  • Opposition builds to standards amendment in financial regulatory reform legislation

    Feb 06, 2012
    Opposition is growing to an amendment to the financial regulatory reform legislation from Sen. Sherrod Brown, D-Ohio, that could subject accounting standards to “political influences.”
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  • Last-minute attempt made to remove small public company exemption from financial reform

    Feb 06, 2012
    “We dispute the notion that investors in smaller public companies do not deserve the same financial reporting safeguards as investors of large public companies,” argued The Center for Audit Quality, along with the CFA Institute and the Council of Institutional Investors in a new letter to the House-Senate conference committee. The groups once again stated their position that small public companies should not be exempt from the auditor attestation requirements of Sarbanes-Oxley Section 404(b).
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  • No further SOX 404(b) exemptions expected

    Aug 29, 2011
    “Financial reporting is more reliable when the auditor is involved with ICFR [internal control financial reporting] assessments,” the SEC summarized in its Dodd-Frank Act mandated study on Section 404(b).
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  • Senate agrees to a final vote on financial regulatory reform legislation

    Feb 06, 2012
    The U.S. Senate has agreed to move toward a final vote on the financial regulatory reform legislation. The vote, 60 to 40, now puts a 30-hour limit on further debate in the Senate.
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  • SEC in no great rush to write fiduciary rule

    Feb 06, 2012
    After delivering a highly anticipated report to Congress recommending that anyone providing personalized retail investment advice should operate under a fiduciary duty, the SEC is apparently in no hurry to promulgate a regulation imposing such a standard.
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