Five years ago, on July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed. As we look back, we see the changes the financial markets have undergone as well as those that have yet to be implemented. Not all of the changes are attributed to Dodd-Frank, however; there are a plethora of rules that everyone in the industry must now follow.
Commissioner Daniel M. Gallagher of the SEC put together a sampling of some of the rules that have come into effect since July of 2010. This particular chart was the impetus for this blog article. The chart includes rules from many organizations including the SEC, CFTC, OCC, FDIC, OFR, FinCEN and many others. In fact, it doesn’t even include state regulations or FINRA guidelines (See: Rules Applicable to U.S. Financial Services Holding Companies Since July 2010). Of course, this only represents the names of the rules, not the actual size of the documents behind them.
Looking at these new rules from the eyes of a Chief Compliance Officer can be overwhelming, and since the requirements in practice span so many systems, resources, and processes, the complexity grows tenfold.
If we focus our attention on Compliance, there are certainly a few key rules that have a direct impact on how these rules are coded, designed, and tested. For example:
- CDS and IRS clearing
- Segregation of Funds
- Reference to NRSRO removed
- Swap Data Requirements
- Volcker Rule
- Money Market Reforms
Given the new rule changes above, we have seen more and more firms considering third party audits and review of their compliance rule library, management agreements and trading workflows with a focus on:
- Rating Requirements
- Downgrade Triggers
- Collateral Posting
- Swap data requirements SEF
- CFTC’s swap regulatory reporting requirements
- Calculating net notional vs gross notional
- Market value vs Notional
IMP Consulting offers its CLEAR (Compliance Library Enhancement and Audit Review) service, which can assist you with the areas outlined above. In addition to testing all the rules coded in your compliance system, partnering with a firm like IMP can make all the difference between hidden regulations violations, and a well managed, regulation-compliant system.