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On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Act"). The Act represents Congress' attempt to address the issues arising out of the financial crisis and represents over a year's effort to craft a legislative solution designed to avoid another financial crisis. The stated aim of the legislation is:

To promote the financial stability of the United States by improving accountability and transparency in the financial system, to end "too big to fail", to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.

The full impact and significance of the Act will be revealed over the next 18 months as various regulatory agencies begin to implement various sections of the Act. Following are a few highlights of the legislation:

Consumer Protections – Creates a new independent watchdog, the Consumer Financial Protection Bureau, to ensure consumers get clear, accurate information on mortgage, credit cards and other financial products.

Ends "Too Big to Fail" Bailouts – Clearly states that taxpayers will not be on the hook to save failing financial companies. The Act imposes tough new capital and leverage requirements, alters the Fed's emergency lending authority to prohibit bailing out an individual firm, and calls for an orderly liquidation mechanism for failing financial institutions.

Advance Warning System – Creates a new Financial Stability Oversight Council to identify and respond to emerging systemic risks posed by large, complex companies, products and activities before they threaten the stability of the economy.

Transparency & Accountability – Eliminates loopholes that allow risky abusive practices to go unnoticed and unregulated, including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.

Mortgage Reform – Establishes a federal standard for all home loans whereby institutions must ensure that borrowers can repay the loans they are sold. The Act also prohibits incentives for subprime loans that steer borrowers into more costly loans and prohibits pre-payment penalties.

Hedge Funds – Requires hedge funds and private equity advisors to register with the SEC and provide information about their trades and portfolios, and increases the assets threshold for federal regulation from $30 million to $100 million which will increase the number of advisors under state supervision.

Credit Ratings – Creates an Office of Credit Ratings within the SEC that will establish new requirements, disclosures and oversight of credit rating agencies to protect investors and businesses.

Executive Compensation – Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and golden parachutes.

Insurance – Creates the first ever office in the Federal government focused on insurance, the Federal Insurance Office to gather information on the industry and to ensure access to affordable insurance by minorities, low- and moderate-income persons and underserved communities.

Investor Protections – Creates a program within the SEC encouraging people to report securities violations and creates a new Investment Advisory Committee to advise the SEC on regulatory priorities and practices.

Addressing the Mortgage Crisis – Provides $1 billion to States to help rehabilitate and redevelop abandoned and foreclosed properties and provides $1 billion in bridge loans to qualified unemployed homeowners, and authorizes a new HUD program for foreclosure legal assistance to low- and moderate-income homeowners.

Visit the United States Senate Committee on Banking, Housing and Urban Affairs for more detailed information.

• Download The Dodd-Frank Act Summary PDF