...Dodd-Frank Act: Did it Work? Introduction “With the President’s signature, the [Dodd-Frank Act] will mark the greatest legislative change to financial supervision since the 1930s,” according to Margaret Tahyar, partner and member of the New York Financial Institutions Group (Tahyar). Officially signed by Barack Obama on July 21, 2010, the Dodd-Frank Act gave positive hope for the future for financial markets and institutions, being viewed as the “most comprehensive financial reform since the Glass-Steagall Act” (Amadeo). However, since the implementation of the bill, various differing opinions on whether the passing of the act has truly helped or hindered the overall financial economy have prevailed. Dodd-Frank Act Overview Officially signed as the Dodd-Frank Wall Street Reform and Consumer Protection Act, the bill was implemented to change and supervise all financial institutions. More commonly referred to as the Dodd-Frank Act, named after the two legislators who proposed it, Senator Chris Dodd and Congressman Barney Frank, the act was created in result of the Great Recession of 2008 and to rein in large Wall Street companies that contributed to the crisis in order to prevent future devastations (Peirce, Robinson and Stratmann). As of 2014, only a third of the nearly 400 required rules had been finalized and only one third had been proposed (Culp). Kimber Amadeo, a US Economy Expert, provides the eight major regulation changes that were brought about from the Dodd-Frank...
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...repeating itself. The only question was what to do. The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), signed into law by President Barack Obama on July 21, 2010, was the proposed answer. The act was the work of Representative Barney Frank (D-MA), Chairman of the Financial Services Committee and Senator Chris Dodd (D-CT), Chairman of the Senate Banking Committee. The purpose of the legislation is “to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end “too big to fail,” to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes” (The Dodd-Frank Wall Street Reform and Consumer Protection Act, 2012). While the law officially made it easier for whistleblowers to alert authorities to fraud, the law itself can be seen as unprogressive, rather than progressive, or forward thinking. According to the Association of Certified Fraud Examiners, fraud can cost an average company five percent of their annual revenues, which makes the detection of such fraud a priority for all stakeholders (Brink, Lowe & Victoravich, 2013). Prior to the Dodd-Frank Act, employees could only report instances of fraud internally, which triggered an organization to investigate the tip. This could potentially cause a conflict of interest. An advantage of the Dodd-Frank Act was the Whistleblower Rule, which aimed to improve...
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...the Dodd-Frank and Sarbanes-Oxley Acts have to financial markets and what are the similarities or differences between these Acts. The Dodd-Frank Act was proposed by Representative Barney Frank (D-Mass.) in the House of Representatives and former Senator Chris Dodd (D-Conn.), Chairman of the Senate Banking Committee, in response to the financial and economic crisis witnessed from 2007-2010. Sarbanes-Oxley established heightened standards for the boards and management of both public companies and public accounting firms. The law was passed after the myriad scandals that rocked American securities markets, e.g., Enron, WorldCom, Tyco, and others. Sarbanes-Oxley is wide in scope, establishing numerous responsibilities on the part of corporate boards, with compliance closely monitored by the government. While employees commonly discover fraud before other monitors, many are reluctant to report it. In an effort to encourage employees to report wrongdoing, Section 301 of the Sarbanes-Oxley Act of 2002 (SOX) requires audit committees of public companies to establish a reporting channel that allows employees to confidentially and anonymously submit claims involving questionable accounting or auditing matters. Despite these internal whistle blowing programs, there is still concern over employee willingness to report wrongdoing. Recently, the Securities and Exchange Commission (SEC) adopted the Dodd-Frank Wall Street Reform and Consumer Protection Act. Provisions...
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...Intermediate Accounting I Professor Stubbs Topical Paper 2: Dodd-Frank Act of 2010 In 2008, when the financial crisis occurred, millions of Americans were left without jobs and trillions of dollars of wealth was lost wealth. To make sure the Great Recession would not happen again, President Barrack Obama put into effect the Dodd- Frank Act. With the help of this law, banks will not be able to take irresponsible risks that had negative effects on the American people. Furthermore, with the Volcker Rule embedded into the act, it will ensure that banks are no longer allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers. The government will monitor banking activities through the use of the newly created Financial Stability Oversight Council that will work with the Office of Financial Research to use its resources and authority to investigate any it sees fit (CroweHorwath). Additionally, the act creates an instrument for government to shut down failing financially institutions without it creating a financial panic that leaves American taxpayers on the hook for the risky activities done by others. The act promotes market discipline that eliminates the expectation that the government will be there to bail them out in the situation where they fail. As it can be seen by the key provisions of the Dodd-Frank Act, its main purpose is to protect American families from having to...
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...Repeal It is logical to believe that Sarbanes Oxley Act, Dodd Frank Act and JOBS Act exists for a reason. Although politic is a very complicated topic and has some sort of influence in establishing a new federal law, SOX, Dodd Frank Act and JOBS Act are reasonably justifiable. After WorldCom and Enron incidents, Sarbanes Oxley Act was established to regulate auditors and public company. After Late 2000’s mortgage crisis and others, Dodd-Frank and JOBS Act was established to regulate financial industry under federal government. Federal regulation seems like always came after a big crisis or downfalls to fix the issue and hopefully prevent future reoccurrence. However, federal government looked like a little bit too reactive because the regulations were always enacted after something bad happened. To make the matter worse, there is no way to proactively prevent any or all frauds or misconducts from happening due to their variety of types. In order to discuss should Sarbanes Oxley, Dodd Frank and JOBS Act be repealed, let’s look into each Act individually and in a more detail sense, In Sarbanes Oxley, some of the important aspects that SOX 2002 deals with are auditor independence and enhanced financial disclosures. It also established Public Company Accounting Oversight Broad (PCAOB) to monitor and oversee public firm’s financial activities. Because there was lack of Audit regulations, it later leaded to the big Enron fraud. Therefore it was clear that something has to be done...
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...Q. 1. What were the major factors that led to the recent financial crisis? How did we get here? Answer: One of the primary factors that can be attributed as to have led the recent financial crisis is the financial deregulation allowing financial institutions a lot of freedom in the way they operated. The manifestation of this was seen in the form of: a) Financial innovations that were not backed up with adequate risk controls and management. b) Too much reliance on Quantitative Risk Management ultimately leading to mispricing of risk across different financial and non-financial investments that were the product of the financial innovations made feasible by financial deregulation. c) The influx of liquidity both original and fabricated that led to significant price appreciation particularly in the real estate sector creating real estate bubble. d) The ever increasing prices of assets allowed ever increasing capacity to borrow. e) The sub-prime mortgage market where it was allowed to originate loans of poor credit quality by one player and sell it to others in a mortgage pool. Hence creating an incentive problem where the one who originates poor quality credit did not bear the credit risk for it. f) All these led financial institutions to the fallacy of being “too big to fail”. g) The fallacy that every risk can be quantified and managed led financial institutions into the trap and they started to lend and finance in ways that were unique...
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...The Dodd-Frank Wall Street Reform and Consumer Protection Act The Dodd-Frank, signed in 2010, was passed as a response to the US Great Recession of 2007/2008. The primary purpose is the create a sound economic foundation to grow jobs, protect consumers, rein in Wall Street and big bonuses, end bailouts and too big to fail, prevent another financial crisis. Key Provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act Consumer Protections with Authority and Independence: The Bureau of Consumer Financial Protection has been established to ensure full protection of US consumers with respect to clear and accurate information that they need for mortgages, credit cards and other financial products. This new independent body has...
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...FRAUD AND SOCIETY ARTICLE SUMMARY 9 This is an article summary of CRYING FOUL: WHISTLEBLOWER PROVISIONS OF THE DODD-FRANK ACT OF 2010, Umang Desai, Loyola University Chicago Law Journal, 2011, 43 Loy. U. Chi. L.J. 427. This Article examines how the Dodd-Frank Act, would encourage whistleblower participation in the promotion of corporate governance in an attempt to restore integrity in the corporate world and the financial markets after the wave of the several of the major fraudulent scandals. The provisions of the Act, are more likely to increase the financial burden on both corporations and the government, but however it has some consequences that could greatly diminish the positive impact of this legislation. To delineate the goals and effects of any whistleblower provisions, it is important to understand the historical treatment of whistleblowers in the legislation and corporate practice. Accordingly, after examining the basic concepts of corporate governance, as well as prior treatment of whistleblowers in the existing whistleblower’s legislation. The primary goals of corporate governance in a market-based system include full disclosure and the production of accurate financial information. Whistleblowers have the potential to play an important role in this system because they are often the first to know when corporate disclosures are inaccurate. Corporate governance regulations are also intended to align the goals of the corporation's leaders with those of its shareholders ...
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...Dodd-Frank Act: Did it Work? Introduction “With the President’s signature, the [Dodd-Frank Act] will mark the greatest legislative change to financial supervision since the 1930s,” according to Margaret Tahyar, partner and member of the New York Financial Institutions Group (Tahyar). Officially signed by Barack Obama on July 21, 2010, the Dodd-Frank Act gave positive hope for the future for financial markets and institutions, being viewed as the “most comprehensive financial reform since the Glass-Steagall Act” (Amadeo). However, since the implementation of the bill, various differing opinions on whether the passing of the act has truly helped or hindered the overall financial economy have prevailed. Dodd-Frank Act Overview Officially signed as the Dodd-Frank Wall Street Reform and Consumer Protection Act, the bill was implemented to change and supervise all financial institutions. More commonly referred to as the Dodd-Frank Act, named after the two legislators who proposed it, Senator Chris Dodd and Congressman Barney Frank, the act was created in result of the Great Recession of 2008 and to rein in large Wall Street companies that contributed to the crisis in order to prevent future devastations (Peirce, Robinson and Stratmann). As of 2014, only a third of the nearly 400 required rules had been finalized and only one third had been proposed (Culp). Kimber Amadeo, a US Economy Expert, provides the eight major regulation changes that were brought about from the...
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...Guohui Huang ACCT 431-Fall 2014 09/19/2014 Dodd-Frank Act The Dodd-Frank Act, also known as the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act was introduced in the House of Representatives by Financial Services Committee Chairman Barney Frank, and by the Senate Banking Committee former Chairman Chris Dodd and therefor named after the two men. The Dodd-Frank represents the most comprehensive financial regulatory reform measures taken since the Great Depression; it was initiated in response to the devastating Financial Crisis of 2007-2008. In simplest terms, the Dodd-Frank Act is a law that places major regulations on the financial industry. In general, the 2,300-page act covers virtually every aspect of the financial services and banking industries. The Act imposed restrictions and reforms upon the industries that had previously been lacking of any substantial regulations. In 2010, President Barack Obama signed the Dodd-Frank Act in to Law to help secure the future economy of the U.S. However, before the official passing of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, America had gone years without accountability for Wall Street and other large banks. The country suffered its worst financial crisis since the Great Depression due to this failure to hold these banks liable for their actions. Businesses failed, the housing market crashed, personal savings were wiped out, and millions of jobs were lost. There are just...
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...11-8-2011 Financial Markets & Inst Dodd-Frank Assignment The Dodd Frank Act has been created as a regulatory reaction from the recent financial crisis. The magnitude of its implications and provisions has not been seen since the great depression and will be conducted as a major overhaul to the financial systems rules. Financial regulation within a system that clearly had ulterior motives and lacked market discipline is inevitable. Without clear transparency of what and how borrowers are investing individuals savings will surely lead to moral hazard and conflicting interests. With Dodd Frank hopefully some of this asymmetric information will be largely more apparent to an inspecting investor. This Act aims to promote the financial stability of the United States financial system by implementing rules and regulations to improve accountability and transparency. Dodd Frank mainly addresses issues dealing with ending the "too big to fail" banks, protecting the American taxpayer by ending bailouts, ensuring consumers safety from abusive financial services practices, and for other related purposes. The legislation gives the government more power to step in and "unwind" financial firms that are failing, enables more oversight of the derivatives market, and to protect the individual investor (Bentley). Thanks to Dodd-Frank, we will see whistleblowers offered incentives for reporting compliance violations to a larger and more powerful SEC. The SEC will also have the power to impose...
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...Are the Dodd Frank Act Whistleblowing Measures Effective? Whistleblowing in the Financial Markets: Name: Professor: Course: Date: In the wake of the Global-Financial Crisis there have been various strategies employed to improve corporate governance, but the main question to ask will they work? The expansion of whistleblower bounties under s.992 of the Dodd-Frank Act 2010 (Dodd-Frank Act) has been one such measure. This measure has been identified as significantly controversial, because it is superseding the traditional internal reporting processes (Schuman & Keating, 2011). The Dodd-Frank Amendment Act that was introduced in 2011 was an attempt to mitigate the potential harm that offering bounties to whistleblowers may have; albeit it seems to be side-lined through consultation processes. Thus, the following research will explore if the bounty provisions are a necessary and effective tool to increase supervision within financial institutions. The concept of “Whistleblower” needs to be identified before moving on in this discussion. The concept relates to a company insider reporting to an appropriate body when there are actions that are breaching the law or acting unethically (Kohn, 2011). Thus, whistleblowing and corporate governance are intrinsically linked. The indications are that the use of monetary incentives is not the most effective model to enforce whistleblowing as an effective deterrent, which can be supported by the poor statistical reception under the...
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...Dodd-Frank Act and The Consumer Protection Agency. Finance 5000 Webster University Mr. Smith Patrick Overby Overby41@gmail.com/ 915-540-1267 Spring 2 2015 INTRODUCTION The Wall Street Reform and Consumer Protection Act or the Dodd-Frank Act was signed into law in 2010 due the financial collapse of the economy. It provided regulatory protection for the consumer and oversight on how banks issued loans. It provided a blueprint for how to approach to resolving the challenges that the financial markets can create. The framework of the law resembles The New Deal in the 1930s because of the Great Depression. The reforms implemented by the Dodd-Frank Act will have far-reaching effects on the financial system and our economy. The Dodd-Frank Act allows company stockholder to determine the type of compensation packages of that management receive. Businesses must create a committee to assess and decide the amount awarded to their leaders. There are myriad of viewpoints towards Dodd-Frank from the detractors and proponent of the law. Individuals who are against the law believe that it is inflexible and will hurt businesses. The supporters of the law understand that this will limit the power of the financial institution. Dodd-Frank Act In 2008, the country was going through one of the worst financial crisis in history that resembled the Great Depression of the 1930’s. It not only affected the U.S. but also threatened the total collapse of large financial institutions...
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...of America’s economy, the Sarbanes-Oxley act and the Dodd-Frank act have attempted to reinforce and uphold the single most important virtue that our capitalist society so desperately depends on, trust. Many of the following names are familiar to us all by now, and for the wrong reasons: Enron, Lehman Brothers, World-Com, and Tyco. So what have SOX and DOD actually accomplished for our capitalist society? What can they actually do to help avert such catastrophic situations in the future? Let us begin with the Sarbanes-Oxley Act. Under the watchful eye of the Securities Exchange Commission the Sarbanes-Oxley act strives to protect the investing public from fraudulent and erroneous accounting practices, in addition to improving the accuracy of public financial statements. The act has transformed the world of accounting by: creating the PCAOB (Title I), increasing an auditor’s independence (Title II), increasing the responsibility/liability of a company’s senior management (Title III), enhanced financial statement disclosure requirements (Title IV), eliminating analyst conflicts of interest (Section V), increasing corporate and criminal fraud accountability (Section VIII), enhancing white–collar crime penalties (Title IX), increasing the responsibility/liability for corporate tax returns (Title X), and increasing the responsibility for corporate fraud and accountability (Title XI). There are several more provisions that comprise the act, but those mentioned are the “heavy hitters”...
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...any kind of danger to the public or the environment. Whistle-blowing can be internal or external. The whistle blowers are often well educated people holding professional positions and are altruistically motivated. They allow themselves to be guided by their own attitudes and hold utilitarian beliefs. However, in case of being found out, the effects can be vastly debilitating for them including losing the job, isolation and personal life being put in jeopardy. The Dodd Frank law provides the whistle blowers protection from retaliation from the companies. If companies retaliate to whistle blowing the employees reporting wrong doing are protected by the Dodd Frank's anti retaliation statute and liable for double back pay (Miceli, et. al. 1984). Introduction Recently, a case of whistle blowing had come to light in September last year when Khaled Asadi filed a complaint that G.E. Energy (USA) violated the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. He alleged that he had been terminated after making an internal report of a possible securities law violation. Asadi had accepted GE energy's offer in 2006 to be its s its Iraq Country Executive and relocated to Amman, Jordan. While serving in this position, Asadi came to know that GE Energy had hired a woman closely associated with a senior Iraqi official to win his favor for negotiating a lucrative joint venture...
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