FSOC Issues Final Rule on Determinations Regarding Nonbank Financial Companies
On April 3, 2012, the Financial Stability Oversight Council (“FSOC”) issued a Final Rule and Interpretive Guidance under Section 113 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 113 authorizes the FSOC to determine that a nonbank financial company (“NBFC”) will be supervised by the Federal Reserve Board and subject to certain prudential standards if the FSOC determines that:
1. material financial distress at the NBFC could pose a threat to the financial stability of the United States (the “First Determination Standard”); or
2. the nature, scope, size, scale, concentration, interconnectedness, or mix of the activities of the NBFC could pose a threat to the financial stability of the United States (the “Second Determination Standard”).
This Stroock Special Bulletin provides an overview of the Final Rule, which does not vary greatly from versions proposed earlier, but which, together with the Interpretive Guidance, does make changes and provide clarification in response to issues raised by commenters in a number of important areas.