The Cost of Implementing Dodd Frank Act

by Dori Tery on September 5, 2015

What are the best practices for Dodd Frank Act?

ObamaSignsDoddFrank21July2010The President Barack Obama signed Dodd- Frank Wall Street Reform and Consumer Protection Act in 2010. This bill is presented by the senators Barney Frank and Chris Dodd to address the financial market turmoil in 2008. The Act has increased a number of regulation on Federal Financial Regulatory agencies, public and private companies.

However, many parties are affected by this Act when they attempt to implement the Dodd Frank initially. There are so many open questions and problem arose during the implementation. Literally the Act changes how the organizations do their business, what kind of investments they can provide and importantly how much of funding they need to keep in their reservation fund and how often and whom they should disclose these information in order to compliance the Act.

Does the implementation of Dodd Frank Act affect you?

One of the problems is due to cost of implementation. For certain organizations like hedge funds are required to pay additional compliance costs, e.g. they need to pay for additional audits that will require to be filled with the Dodd Frank regulators. Family offices and smaller hedge funds, in fact, can apply for certain exceptions to this Act. The other additional compliance costs for implementing the Dodd Frank bills is organizations need to disclose any derivative that is used by them to hedge certain balances, executive pay, company operating cost and even the average salary of the employees within the company.

In addition, a new consumer protection agency is setup to protect the implementation. The organization indirectly will have to bear additional cost to associate with Dodd Frank compliance in connection with the new consumer protection reform. Other impacts like the rules have limited certain Wall Street agencies from propriety trading or they need to pay additional cost to compliance with the Act.
The Act is also governing the financial advisors of a company must register themselves with the Securities and Exchange Commission (SEC). This has enforced the advisors to make whatever effort to get the new status and yet the new rules are long and complicated.

The US Government agencies are ready to help

To help with the implementation of Dodd Frank Act, US government agencies like Treasury Department, Federal Reserve and other agencies are asked to help participating in any new rule making process and must reduce the impact to organizations or companies as much as possible. Due to this, some of the compliance portion has been delayed several of times. The full compliance is not expected until a later date is finalized. Therefore, the ultimate impact to both public and private is still unclear.

Lastly, many organizations esp. the big companies are already implement many recovery actions within their organization in order to overcome additional cost of compliance of Dodd Frank. The act has made these companies more transparent to public and eventually it will be benefit to investors like us!

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