On 11 December 2009, the US House of Representatives passed the "Wall Street Reform and Consumer Protection Act of 2009". The bill revamps fundamental aspects of financial services law and is intended to address many of the perceived causes of the recent financial crisis. At well over 1,000 pages, the bill defies summary, but especially significant provisions include:

Still to come, however, is the corresponding Senate bill and the House-Senate conference that will be necessary to knit together the work of the two chambers. Even after a final joint bill emerges, there will be important follow-on rule-making by the regulators.

The legislation creates a new systemic risk regulator, called the Financial Services Oversight Council, the voting members of which would be the heads of the most prominent federal financial regulators. The Council is authorised to identify financial companies that could pose a threat to financial stability or the economy and to subject those companies to stricter prudential standards. The Council is authorised to so designate any financial company that it deems to be a source of systemic risk—such designation need not be limited to banks and bank holding companies.

Systemically important institutions so designated will be subject to the supervision of the Federal Reserve, which will impose stricter prudential standards on them, including:

The Federal Reserve may also apply stricter prudential standards to foreign parent companies that control a US branch, subsidiary or operating entity that is systemically important.

The legislation establishes a "Systemic Dissolution Fund" to facilitate the orderly dissolution of any failed financial company that poses a systemic threat to the financial markets or economy. The FDIC will act as the receiver to dissolve the troubled financial company. In any such dissolution, shareholders must receive nothing until all other claims are fully paid, any funds from taxpayers must be repaid before payments are made to creditors, unsecured creditors must be forced to bear losses, and the financial company's management and board of directors must be removed.

The legislation merges the Office of Thrift Supervision into the Office of the Comptroller of the Currency (OCC). The OCC will continue to be the primary regulator of national banks, and will now also regulate federal savings associations. The legislation also eliminates the exception from the definition of "bank" in the Bank Holding Company Act for industrial banks, industrial loan companies and insured savings associations. A company that controls an industrial bank or industrial loan company will be required to separate its commercial and financial activities. The company will accomplish this separation by creating a new intermediate holding company, through which it will conduct all of its activities that are financial in nature.

The Consumer Financial Protection Agency (CFPA), a new federal agency, will serve as an independent regulator with broad authority over "any financial product or service" used by consumers primarily for personal, family, or household purposes. As a result of the legislation, many consumer financial regulations that are currently divided among several agencies would be consolidated within the CFPA. This represents an effort to centralise consumer financial protection to standardise regulatory oversight, which in turn would minimise opportunities for regulatory arbitrage. The CFPA will impose fees and assessments on both banking and non-banking institutions.

The legislation provides for the registration, supervision, and regulation of OTC derivatives and swap market participants. The Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) will govern swaps, swap dealers, and certain end users referred to as "major swap participants", defined as any non-dealer who either:

Each registered swap dealer and major swap participant will be required to meet minimum capital requirements and minimum initial and variation margin requirements. Swap dealers and major swap participants must also register with the CFTC/SEC, and along with such registration will come certain reporting, record-keeping, and business conduct requirements, among others. Furthermore, the legislation requires the CFTC to establish limits on the size of positions, other than bona fide hedge positions, in physically settled commodities transactions or options on them, subject to certain exclusions.

The legislation mandates that certain types of swaps be cleared by a regulated clearing organisation. A swap must be cleared if a clearing organisation will accept such swap for clearing and the CFTC/SEC require that swap to be cleared, subject to certain exceptions. To achieve what the legislation refers to as "execution transparency", the legislation requires that all swaps subject to the clearing requirement also be traded on an exchange or on a swap execution facility. Finally, the legislation enhances restrictions on derivatives transactions between a bank and its affiliates by subjecting them to Section 23A of the Federal Reserve Act, which would require derivative trades to be fully collateralised for the life of the transaction. The derivatives transactions will need to be collateralised for the amount of the current and potential future credit exposure, and will count towards the Section 23A quantitative limits.

Advisers to hedge funds have been targeted for SEC registration for some time, and the legislation requires registration for advisers to many types of private funds—including private equity—by eliminating the so-called "private adviser exemption" of the US Investment Advisers Act of 1940 (Advisers Act). Many fund advisers have relied on the private adviser exemption to avoid registration, as the exemption applies to any adviser to 14 or fewer clients, with an advised fund counting as only a single client.

As a result of registration, private fund advisers will be subject to the full panoply of the Advisers Act requirements. Importantly, the legislation does not require registration for private funds themselves under the US Investment Company Act of 1940 (Investment Company Act), which would have subjected private funds to the Investment Company Act's restrictions on the use of leverage and on affiliate transactions.

The legislation also enacts many disparate investor protection reforms, which include:

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