Developments in Securities Regulation, Corporate Governance, Capital Markets, M&A and Other Topics of Interest. MORE

On Tuesday, November 23, Treasury Secretary Tim Geithner, in his capacity as chairperson of the Financial Stability Oversight Council, or FSOC, hosted the second meeting of the FSOC at the U.S. Department of the Treasury.  The meeting included a closed press session and an open press session, which consisted of an update on mortgage servicing and foreclosure issues and votes on several resolutions to advance implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  These resolutions included approval of the publication of an Advance Notice of Proposed Rulemaking regarding authority to designate financial market utilities as systemically important, the Council’s committee structure and minutes of the inaugural Council meeting.

 Sections 112(a)(2)(J) and 804(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act give the FSOC the authority to identify and designate as systemically important a financial market utility if the FSOC determines that the failure, or a disruption to the functioning, of a financial market utility could create or increase the risk of significant liquidity or credit problems spreading among financial institutions or markets and thereby threaten the stability of the financial system of the United States.

 Section 803(6) of the Dodd-Frank Act generally defines a “financial market utility” as any person that manages or operates a multilateral system for the purpose of transferring, clearing, or settling payments, securities, or other financial transactions among financial institutions or between financial institutions and that person.  The utility-like arrangements used to settle financial transactions, whether involving payments, securities, derivatives, or other similar financial instruments, are critical parts of the financial infrastructure for the economy and are integral to the soundness of the financial system and overall economic performance.    The importance of these arrangements has been highlighted by the recent period of market stress.  The Advance Notice of Proposed Rulemaking  discussed above invites public comment on the criteria and analytical framework that should be applied by the FSOC in designating financial market utilities under the Dodd-Frank Act.

 The CFTC issued this statement on the Advance Notice of Proposed Rulemaking.

 Check frequently for updates on the Dodd-Frank Act and other important securities law matters.