Dodd-Frank – Compliance Building

Perhaps one day there’ll be another famous movie line: “Dodd-Frankly, my dear, I don’t give…” But probably not. Its not clear if Dodd-Frank has been a success or a failure.

It certainly has been a change.

From the regulated side, I think the failure or success depends on which part of Dodd-Frank affects you. New regulations make winners and losers. Most research shows that it makes it harder for new firms to enter the regulated space.

From 2009 to 2013 only 7 new banks were formed, fewer than 2 per year. From 1990 to 2008, over 2,000 new banks were formed, more than 100 per year. Its easy to blame that on Dodd-Frank, but the economy has been weak and interest rates low.

Certainly, big banks are not any smaller and few believe that too big to fail is gone. It brief glance at bank credit ratings, you can see a boost in the ratings for an implied government bail-out.

It also depends on how you rate size: amount of deposits, amount of assets, amount of lending activity.

We have seen the reach of the non-bank too big to fail labeled and then removed. The firms may be important, but not systemically important.

One of the clear winners is the compliance profession. Dodd-Frank clearly requires more compliance efforts and people to take on those efforts.

Sources:

Regulating Away Competition: The Effect of Regulation on Entrepreneurship and Employment by James Bailey and Diana Thomas
Where Are All the New Banks? The Role of Regulatory Burden in New Charter Creation by Robert M. Adams and Jacob P. Gramlich
Big Banks Use a Footnote to Look Smaller by Matt Levine
Credit for the title goes to Adrian Lurssen via G+

There is a lot happening in the Dodd-Frank Wall Street Reform and Consumer Protection Act. (Yes, that appears to be the agreed upon name of the financial reform bill.)

I’m most interested in its Title IV: Private Fund Investment Advisers Registration Act of 2010(.pdf).

The act will remove the current exemption from SEC registration for “small” investment advisers. If you have more than $30 million under management and fewer than 15 clients, you were exempt from registration with SEC under section 203(b)(3).

If the bill is enacted, that exemption will be removed and private fund managers will have to register. If the manager has more than $150 million under management they will register with SEC.

The final text of the Private Fund Investment Advisers Registration Act of 2010has been released.

The Senate-House Conference Committee has released all 2319 pages of the the final text of its conference report: Dodd-Frank Conference Report. I’ll get to the rest of it at some point.

As of this morning, it sounds like the bill is still short of the votes necessary to get it passed in the Senate. One of my Senators, Scott Brown, is unhappy with the new tax imposed by the too-big-to-fail regime. He would be vote 41 and could prevent a filibuster from stopping the bill from a final vote in the Senate.

Sources:

Conference Report on Private Fund Investment Advisers Registration Act of 2010.
Dodd-Frank Wall Street Reform and Consumer Protection Act conference report and votes from the House Financial Services Committee

Updated pdf file with text of the Private Fund Investment Advisers Registration Act of 2010

Tag: Dodd-Frank

Dodd-Frankly, My Dear, I Don’t Give..

Final Text of the Private Fund Investment Advisers Registration Act of 2010