The Dodd-Frank Wall Street and Consumer Protection Act has provided headaches for employers through its whistleblower and stress test provisions. But does the Act make it impossible for some U.S.-based banks to adequately serve their customers as well?
According to Bloomberg, London-based Citibank staff members have been forced into long hours thanks to one Dodd-Frank provision that prevents some clients from dealing with U.S.-based brokers. The Act prohibits U.S. traders from conducting business with those who have not agreed to International Swaps & Derivatives Association (ISDA) rules.
This provision has created a major headache for many banks who conduct sizeable business abroad, including Citibank. Alex Jackson, head of European investor sales for Citibank, told Bloomberg that European money managers and Brazilian hedge funds are among those that have not agreed to ISDA rules.
“No non-compliant investor or client is able to trade with a U.S.-based salesperson or trader physically located in the U.S.,” London-based Jackson said, citing a footnote to the regulations on swaps trading. “Any client who has not signed the ISDA protocol falls under this.”
Previously, the bank’s locations in Asia, Europe and the U.S. would hand off any unresolved client contacts at the end of the day. However, since a “material” number of trades conducted in these locations breached the Dodd-Frank rules, certain members of the U.K. staff have been asked to stay later. Jackson says that two employees stay until at least 9 p.m. regularly, working 14-hour days.
Jackson says that a “handful” of non-compliant clients have taken advantage of the increased London hours, although business has not been too heavy. As a result, the originally-scheduled staff of four people staying late was later reduced to two.
Risk and compliance is becoming a hot topic for U.S. banks, and proposed rule changes may increase compliance costs even further. And if companies ignore the problems within their compliance programs, the SEC has not been shy about cracking down hard, as what happened with three major investment firms just last week.
How has the Dodd-Frank Act changed regulatory actions in the legal community? InsideCounsel has the story covered: