What Is The Dodd-Frank Act?

The Dodd-Frank Act is the Wall Street Reform and Consumer Protection Law that regulates financial markets and protects consumers in the United States. The law derives its name from the two key lawmakers who were most active in bringing it about: Barney Frank and Chris Dodd.

The Act was signed into law by the Obama Administration in 2010. It was effectively the United States’ hedge against a financial crash, such as was witnessed during the 2007–2008 Great Recession. It is, also, one of several laws that the United States Securities and Exchange Commission (SEC) uses to promote transparent financial market operations. Attorney Stuart Meissner was involved in crafting the act’s whistleblower protections and rewards regulations.

This law may be replaced by the Financial CHOICE Act, an Act that has already been jump started by the House of Representatives who voted for this replacement on June 8, 2017.

Key Mandates of the Dodd-Frank Act

1. Supervision of Federal Financial Institutions

For the Dodd-Frank Act to be effective, relevant systemic structures had to be defined. The relevant systemic structures would have the capacity to acquire and analyze the data about the financial institutions that trade swaps and other financial commodities.

To this end, this law stipulated the formation, constitution, and mandate of the Office of Financial Research (OFR), Orderly Liquidation Authority (OLA), and the Financial Stability Oversight Council (FSOC). These institutions would work closely with the Commodity Futures Trading Commission (CFTC) to collect data concerning financial institutions, as well as the factors that affect the operation of those financial institutions. By acquiring and processing such data, the decisions on how to mitigate risk factors would be information-based.

This law defines the requirements for the establishment and operation of financial institutions as well as the sanctions for noncompliance. For instance, the Orderly Liquidation Council can demand a downsizing of extra-large financial institutions whose financial downfall could cripple a significant percentage of the economy. Additionally, such institutions, or institutions whose financial performance is below par, may be forced to limit their investments to ensure they have sufficient cash in their reserves.

2. Consumer Protection

The brunt of any economic dip is experienced by the investors and taxpayers more than it does the financial institutions and corporations. In economic crunches, taxpayers are forced to pay higher taxes, and some taxpayers may lose their livelihoods (both jobs and investments) entirely.

The Dodd-Frank Act aims to reduce the collapse of financial institutions through the supervision and regulation mentioned above. This minimizes the risk of taxpayers and investors losing their livelihood.

2a. Consumer Protection 1: Orderly Liquidation

One of the consumer protection measures is the Orderly Liquidation Fund that is set apart to fund the restructuring of companies whose financial situation is so bleak that they cannot meet their financial obligations and are at risk of losing everything.

By making this fund available, investors’ money is less likely to be utilized by institutions to sort out the financial mess. Such companies may also be forced to improve their performance before reaching out to new consumers.

2b. Consumer Protection 2: Mortgage and Lending

One of the biggest ways that consumers incur massive losses with their financial institutions and investment companies is through unavoidable circumstances that, under the fine print of the contracts, leave the consumers exposed. Most financial institutions cash in on unsuspecting consumers when it comes to mortgages and other credit or purchase products. The Dodd-Frank Act requires all financial institutions to avail their terms of services to the consumers in a language that the consumer understands.

3. Dodd-Frank Act’s Protection of SEC Whistleblowers

The term “whistleblower” refers to people who can reveal incriminating information against other entities. Before the Dodd-Frank Act, whistleblowers could only seek protection under one of the programs administered by the SEC and the Occupational Safety and Health Administration (OSHA).

The Dodd-Frank Act upped the protection of whistleblowers. Under this law, whistleblowers can not only get protection against any action that may be taken against them by the entities they report, but they stand to benefit from 10 to 30 percent of the recovered money from the fraudulent institutions. Read more about the whistleblower’s reward here: http://www.investopedia.com/terms/d/dodd-frank-financial-regulatory-reform-bill.asp.


The Dodd-Frank Act defines the structures and procedures for adequate assessment of the financial institutions’ stability, the supervision of the operations of such institutions, and an orderly liquidation of such institutions. The law can secure the financial security of the United States to a great extent and protect consumers from crippling losses resulting from non-transparent transactions.

This law takes the whistleblowers’ protection a notch higher by recommending a reward of 10 to 30 percent of the recovered money from fraudulent institutions. Although signed into law in ust 2010, the act has had a significant positive impact.

The Dodd-Frank Act’s stringent regulations were challenged by several institutions from the different states in 2012 and 2013. Some of the financial institutions that closed down or scaled back their services blame this law’s strict regulations. The Financial CHOICE Act might replace the Dodd-Frank Act and undo most of the regulations.

You can find more information here: http://www.mondaq.com/unitedstates/x/261844/Corporate+Commercial+Law/The+New+Rules+For+Becoming+A+Successful+SEC+Whistleblower. That pages provides details on how to become a successful whistleblower and increase your chances of making the Dodd-Frank Act effective in protecting you.