FSOC Proposes Hearing Procedures for Systemic Designations of Nonbank Financial Companies and Financial Market Utilities

May 23, 2012

Yesterday late afternoon the Financial Stability Oversight Council (the “Council”) proposed rules that would set procedures for the Council’s hearings on proposed determinations that a nonbank financial company or financial market utility is systemically important, and thus subject to enhanced prudential regulation. 

Under the Dodd-Frank Act, the Council has authority to determine that a nonbank financial company or financial market utility is subject to enhanced prudential regulations.  The Act includes criteria that the Council must consider in making that determination, which are intended to measure a firm’s systemic importance.  The Council has adopted rules incorporating the statutory criteria into designation process rules for nonbank financial companies and financial market utilities. Our client memoranda (proposed rule and final rule) provide additional detail on the Council’s designation process rules for nonbank financial companies.

The proposal would supplement the designation process rules.  More specifically, the proposed hearing procedures would set the process by which a firm that has been proposed to be designated as systemically important under the designation process rules can obtain a written hearing, and request an oral hearing, before the Council on the proposed designation.  The proposal also specifies the types of information that a firm would need to submit to the Council as part of a request to schedule a written hearing or to petition for an oral hearing.  The proposal would clarify that materials submitted in connection with a hearing are confidential, but subject to the Council’s rules implementing the Freedom of Information Act.

Notably the proposal does not contemplate procedures by which the Council would obtain information from a firm during the designation process (that is, before the Council makes an official proposed designation).  It is unclear whether the Council will provide formal guidance on that aspect of the designation process or whether it will be negotiated on a firm-by-firm basis during the Council’s evaluation of potential designees.  We will continue to apprise you of additional information concerning the designation process as it becomes available.


Follow us on twitter >

If you have questions regarding this publication, please contact any of the lawyers listed below or your regular Davis Polk contact.

Randall D. Guynn 212 450 4239
Annette L. Nazareth 202 962 7075
Margaret E. Tahyar212 450
Jai R. Massari 202 962 7062
Gabriel D. Rosenberg 212 450 4537
Notice: This publication, which we believe may be of interest to our clients and friends of the firm, is for general information only. It is not a full analysis of the matters presented and should not be relied upon as legal advice. If you would rather not receive these memoranda, please respond to this email and indicate that you would like to be removed from our distribution list. If you have received this email in error, please notify the sender immediately and destroy the original message, any attachments thereto and all copies. Refer to the firm's privacy policy located at for important information on this policy. Please add Davis Polk to your Safe Senders list or add to your address book.
© 2012 Davis Polk & Wardwell LLP