Dodd Frank Internal Controls

The Dodd Frank Wall Street Reform and Consumer Protection Act (DFA) came into force on 21 July 2010.

It made changes to the American financial regulatory environment that affected all federal financial regulatory agencies and almost every part of the nation’s financial services industry.

The Dodd-Frank Act’s Internal Business Conduct rules require Swap Dealers (SDs) and Major Swap Participants (MSPs) to establish risk management procedures adequate for managing their day-to-day business.

The final rule requires swap dealers and major swap participants to establish a risk management program consisting of written policies and procedures designed to monitor and manage the risks associated with their swap activities. Under the final rules, the risk management program must take into account:

  • Credit Risk
  • Market Risk
  • Liquidity Risk
  • Foreign Currency Risk
  • Operational Risk
  • Legal Risk etc

The final rules also require that swap dealers and major swap participants maintain polices for monitoring their traders throughout the trading day for compliance with established trading limits and require traders to follow established procedures for executing and confirming transactions.

The rules also require diligent supervision of traders and separation of traders from the risk management unit.