The Dodd-Frank Act is a legislation that governs financial institutions and seeks to avert future financial crises. It provides definitions for various terms pertaining to banking, investing, insurance, and other related areas. Some of the terms outlined in the act encompass financial institution, nonbank financial company, investment adviser, accredited investor, swap, and systemic risk. While these terms may be intricate, they are crucial for comprehending the functioning and regulation of the financial system.
Title I: Financial Institution: A company that offers financial services, such as banks, credit unions, and investment firms. Nonbank Financial Company: A company that provides financial services but is not a bank or credit union. Bank Holding Company: A company that owns one or more banks.
Title II: Financial Institution: Same as in Title I. Bridge Financial Organization: A temporary company created to take over the assets of a failing financial institution. Broker: A person or company that buys and sells securities on behalf of others. Dealer: A person or company that buys and sells securities for their own account.
Title III: Savings Association: A type of bank that specializes in accepting deposits and making loans for home mortgages. Non-interest Bearing Transaction Account: A bank account that does not earn interest but is used for transactions, such as paying bills and making purchases.
Title IV: Investment Adviser: A person or company that provides advice on investing in securities. Accredited Investor: A person or company that meets certain financial criteria and is allowed to invest in certain securities not available to the general public. Investment Company: A company that pools money from investors and invests it in securities. Venture Capital Fund: An investment company that invests in start-up companies. Intrastate Adviser: An investment adviser that only provides advice to clients within the same state where the adviser is located.
Title V: Non-admitted Insurance: Insurance that is not regulated by the state where the policyholder is located. Nonbank Financial Company: Same as in Title I. Premium Tax: A tax on insurance premiums paid by policyholders. Reinsurance: Insurance that one insurance company buys from another insurance company to protect itself against large losses. State of Domicile: The state where an insurance company is incorporated. Surplus Lines Broker: A broker that specializes in placing insurance coverage with non-admitted insurers.
Title VI: Bank Holding Company: Same as in Title I. Savings and Loan Holding Company: A company that owns one or more savings and loan associations. Proprietary Trading: Trading in securities or other financial instruments for a company’s own account. Depository Institution: A company that accepts deposits from customers, such as banks and credit unions. Financial Holding Company: A company that owns one or more banks or other financial institutions and engages in a wide range of financial activities. Derivative Transaction: A financial contract whose value is based on the value of an underlying asset, such as a stock or commodity. Repurchase Agreement/Reverse Repurchase Agreement: A transaction in which one party sells securities to another party and agrees to buy them back at a later date. Banking Entity: A company that engages in banking activities, such as accepting deposits and making loans.
Title VII: Eligible Contract Participant: A person or company that meets certain financial criteria and is allowed to trade in certain types of derivatives. Foreign Exchange Swap: A derivative contract in which two parties agree to exchange one currency for another at a future date. Major Swap Participant: A person or company that engages in a large volume of swap transactions or has a large exposure to swap transactions. Swap: A derivative contract in which two parties agree to exchange cash flows based on the value of an underlying asset. Security-Based Swap: A type of swap whose value is based on the value of a security, such as a stock or bond. Swap Dealer: A person or company that engages in a business of buying and selling swaps for their own account or on behalf of others. Security-Based Swap Dealer: A person or company that engages in a business of buying and selling security-based swaps for their own account or on behalf of others. Major Security-Based Swap Participant: A person or company that has a large exposure to security-based swaps or engages in a large volume of security-based swap transactions. Security-Based Swap Agreement: A contract that sets out the terms of a security-based swap transaction. Designated Contract Market: A trading platform designated by the Commodity Futures Trading Commission to trade certain types of derivatives. Swap Data Repository: A company that collects and maintains data on swap transactions. Security-Based Swap Data Repository: A company that collects and maintains data on security-based swap transactions.
Title VIII: Financial Market Utility: A company that provides services to financial markets, such as clearing and settlement of securities transactions. Security-Based Swap: Same as in Title VII. Financial Institution: Same as in Title I.
Title IX: Federal banking agency: An agency that regulates banks and other financial institutions, such as the Federal Reserve and the Office of the Comptroller of the Currency. Originator: A person or company that creates a mortgage loan. Qualified Residential Mortgage: A type of mortgage loan that meets certain criteria and is exempt from certain regulations. Securitizer: A person or company that packages mortgage loans into securities and sells them to investors.
Title X: Covered Persons/Non-depository Covered Persons: Waiting to be defined under 12 U. S. C. § 5514(a)(2). Visitorial Authority/Powers: The authority of a government agency to inspect and examine the books and records of a company to ensure compliance with laws and regulations. Federal Consumer Financial Laws: Laws that regulate consumer financial products and services, such as mortgages, credit cards, and payday loans.
Title XI: Credit facility: A loan or other type of credit that is extended to a company or individual. Financial Institution: Same as in Title I. Insured Depository Institution: A bank or credit union that is insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration. Insured Depository Institution Holding Company: A company that owns one or more insured depository institutions.
Title XIV: Mortgage Originator: Same as in Title IX. Prime Offer Rate: The interest rate that banks charge their most creditworthy customers for loans.
Title XVI: Swap: Same as in Title VII. Interest Rate Swap: A type of swap in which two parties agree to exchange cash flows based on different interest rates. Credit Default Swap: A type of swap in which one party agrees to pay the
Dodd-Frank refers to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is a comprehensive financial reform legislation enacted in 2010 in response to the 2008 financial crisis.
The main objectives of Dodd-Frank are to promote financial stability, protect consumers from abusive financial practices, increase transparency in the financial system, and regulate the activities of financial institutions.
The Volcker Rule is a provision of Dodd-Frank that prohibits banks from engaging in proprietary trading and restricts their ability to invest in certain types of speculative investments. Its aim is to prevent banks from taking excessive risks with depositors’ money.
The CFPB is an independent agency established by Dodd-Frank to protect consumers in the financial marketplace. It regulates and supervises financial institutions, enforces consumer protection laws, and educates consumers about their rights and responsibilities.
Dodd-Frank defines a SIFI as a financial institution whose failure could pose a threat to the stability of the financial system. These institutions are subject to enhanced regulatory oversight and stricter capital requirements.
Dodd-Frank includes provisions that protect whistleblowers who report violations of securities laws to the Securities and Exchange Commission (SEC). It prohibits retaliation against whistleblowers and provides financial incentives for reporting wrongdoing.
Dodd-Frank establishes criteria for a mortgage to be considered a “qualified mortgage,” which provides certain legal protections to lenders. It requires lenders to assess a borrower’s ability to repay the loan based on specific underwriting standards.
The FSOC is a council of federal regulators created by Dodd-Frank to identify and address risks to the stability of the U.S. financial system. It has the authority to designate non-bank financial companies as “systemically important” and subject them to enhanced regulation.
Dodd-Frank defines a swap as a derivative contract that involves the exchange of financial instruments, such as interest rates, currencies, or commodities. It imposes regulations on the trading and clearing of swaps to increase transparency and reduce systemic risk.
Non-compliance with Dodd-Frank regulations can result in various penalties, including fines, sanctions, and legal actions. The specific penalties depend on the nature and severity of the violation, and they are enforced by regulatory agencies such as the SEC and the CFPB.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
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