Dechert Issues Comment Letter Regarding Financial Stability Oversight Council's Proposed Rule Regarding the Designation of Systemically Important Financial Companies
February 25, 2011
Dechert News Release
Thomas P. Vartanian, chair of Dechert LLP's Financial Institutions practice, filed a comment letter with the Secretary of the Treasury as chairman of the Financial Stability Oversight Council (FSOC) on the Council's proposed SIFI Designation Rule.
"We have the greatest respect for the Council and the complex, unprecedented job that it has. But, the Council cannot infer, intuit or invent the authority to write implementing rules. It must be given that authority by the Congress, something that Dodd-Frank did not do," Vartanian said. "The unprecedented nature of systemic regulation and the costs, burdens and obligations that it will impose on the companies designated, as well as their shareholders and lenders, makes this one of the most serious government undertakings in the financial history of the United States. It must be handled carefully, transparently and consistent with the law.
"Beyond the authority issue, the opaque nature of the process to date has disclosed almost nothing about the FSOC's thinking and does not provide interested parties a meaningful basis on which to comment."
Dechert's comment makes the following points:
- While FSOC has begun a rulemaking proceeding that will have enormous impacts on companies that subject to new systemic regulation, nowhere in the statute did Congress give it such authority.
- In fact, the Congress did provide rulemaking authority to the FRB with regard to Title I of the Dodd-Frank Act.
- The impact of this process is enormous and if there is to be such a set of rules, they must be authorized and the process must be meaningful - to date the FSOC has not conducted the process in a way that would inform the public what it is thinking so that interested parties can meaningfully comment.
- FSOC cannot proceed down a path that was not authorized under law and must terminate the rulemaking process.
A partner at Dechert, Vartanian has more than 30 years experience as a corporate counselor, litigator, deal maker and regulatory expert. He has advised clients in the financial services industry such as Wells Fargo, J.P. Morgan, Bank of America, Citadel, Paulson & Company and Merrill Lynch in a wide variety of matters, including mergers and acquisitions; controlling and passive private equity investments; FDIC receiverships; D&O liability cases; bank enforcement; internal investigations; contests for control of financial institutions, reorganizations and recapitalizations of distressed banks; securitizations and structured finance; and matters involving government sponsored enterprises (GSEs). Recently, he was engaged by the American Bankers Association to author its published analysis of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. He also is leading a team of Dechert lawyers in advising the Securities Industry and Financial Markets Association (SIFMA) on Dodd-Frank implementation with regard to securitization markets.
To read more, view the comment letter (PDF).