In a recent publication, the Goodwin Proctor law firm examined some of the aspects of the Dodd-Frank Wall Street Reform and Consumer Protection Act that may potentially affect the securities lending industry. In particular, the Goodwin Proctor identifies the following principal effects of the Act on securities lending industry participants:
- Changes to the statutory regime governing insolvencies of significant broker-dealers and other financial institutions.
- Limitations on the ability of Federal Deposit Insurance Corporation ("FDIC")-insured banks and their affiliates to sponsor, maintain and engage in transactions with cash collateral pools.
- Credit exposure limitations and additional capital requirements that may result in lower volumes of securities lending and repurchase agreement activity by affected banks and bank affiliates, both as principals and in indemnified agency securities lending programs.
- Enhanced limitations on transactions between affected banks and their affiliates, which may impact riskless principal or "conduit" lending and similar alternative lending programs.
- Changes to the federal securities laws that will result in additional disclosure in connection with securities lending.
The publication examines each of these areas, explaining more fully how provisions of the Dodd-Frank legislation may affect participants in securities lending, and the securities lending industry as a whole.
The full text of the Goodwin Proctor alert is available at: http://www.goodwinprocter.com/Publications/Newsletters/Client-Alert/2010/Dodd-Frank-and-Other-Developments-Affecting-the-Securities-Lending-Industry.aspx