When Congress passed the Dodd-Frank Act — hailed as the most sweeping financial reform measure in decades — last July the former chairman of the Securities and Exchange Commission dubbed it the “Lawyers’ and Consultants’ Full Employment Act of 2010,” predicting an avalanche of new work for consultants and attorneys tasked with helping financial institutions navigate new regulations.
Among Washington law firms with a focus on the financial services sector, this forecast has proved true. In the first year since adoption, some of the District’s biggest firms are raking in new business advising banks, hedge funds, investment advisers and trade associations on the rulemaking process. And many are signing new clients — among them insurance companies and providers of consumer products — that are facing more intense scrutiny than ever before as a result of the legislation.
The Dodd-Frank Wall Street Reform and Consumer Protection Act created a more stringent regulatory climate for almost all financial institutions, be they banks or derivatives traders. It gave government a say on executive compensation and created the Consumer Financial Protection Bureau. Most of the provisions in the 2,300-page act have yet to be implemented.
For firms that beefed up their D.C. offices with regulatory specialists, the investment in manpower and resources is paying off. A month after Covington & Burling hired top lobbyist Edward Yingling and brought back John Dugan from the Office of the Comptroller of the Currency to head the firm’s financial institutions group, Wells Fargo and the American Bankers Association retained Covington to lobby on their behalf in Dodd-Frank matters, according to lobbyist registration records.
“The financial services world has become a much more regulated place and there is definite demand for more regulatory expertise at all firms,” Dugan said. “So my coming back and Ed joining reflects that fact and the anticipation of the increased work, and the increased work has in fact arrived. [Dodd-Frank] has significantly increased business on the regulatory side.”
The work is pouring in from new clients as well as companies with which law firms have long-standing relationships, attorneys said. As a result, many firms’ financial services, corporate and securities practices are thriving.
“This is a very substantial statute, so it’s going to have a long shelf life and will result in existing clients having questions and new clients that may not have historically been regulated by these agencies coming into the regulatory framework,” said Richard Alexander, a partner at Arnold & Porter who specializes in enforcement and governance matters affecting the financial services industry.
Many clients that previously retained law firms on other matters now have new needs in light of Dodd-Frank, said Ron Glancz, chairman of Venable’s Financial Services Group.
“They may be existing clients but haven’t used the bank regulatory group or legislative group before,” said Glancz, citing mutual fund and insurance companies as clients that previously used Venable on employee benefits that recently turned to the firm for regulatory advice.
Then there’s work coming out of litigation related to Dodd-Frank. Venable was one of several firms that represented Minnesota bank TCF Financial Corp. in challenging the constitutionality of the Durbin Amendment, one component of Dodd-Frank that allows the Federal Reserve to cap fees that banks charge for debit card transactions. TCF dropped the lawsuit late last month after an appeals court upheld a decision denying the bank’s request to stop the amendment from being enforced.
Another major source of legal work for firms with large lobbying arms is continuing efforts on Capitol Hill on behalf of clients — some of which hired law firms during the legislative process — over how regulatory agencies interpret specific parts of the act.
“We’ve been active on Capitol Hill in terms of follow-up work [for] clients that had been actively lobbying during Dodd-Frank and are now trying to make sure the regulators’ interpretation of the statute tracks with what Congress intended,” said David Carlin, head of the public law and policy group at Akin Gump.
The movement represents a shift in the role lawyers are playing in the regulatory reform effort, from analyzing its impact to now helping clients shape the rulemaking process.
“We haven’t seen full implementation of a lot of these things,” Alexander said. “As these processes mature, we’ll see a shift form the analysis to the advisory role, then to the part of our practice where we’re talking about implementation and compliance.”