Goldman Sachs 2015 Annual Report Download - page 30

THE GOLDMAN SACHS GROUP, INC. AND SUBSIDIARIES
The Dodd-Frank Act will result in additional regulation by
the SEC, the CFTC and other regulators of our broker-
dealer and regulated subsidiaries in a number of respects.
The legislation calls for the imposition of expanded
standards of care by market participants in dealing with
clients and customers, including by providing the SEC with
authority to adopt rules establishing fiduciary duties for
broker-dealers and directing the SEC to examine and
improve sales practices and disclosure by broker-dealers
and investment advisers. In addition, the U.S. Department
of Labor has issued proposed rules defining the
circumstances in which a person would be treated as a
fiduciary under the Employee Retirement Income Security
Act of 1974 by reason of providing investment advice to
retirement plans and individual retirement accounts, as well
as proposed exemptions.
Our broker-dealer and other subsidiaries are also subject to
rules adopted by federal agencies pursuant to the Dodd-
Frank Act that require any person who organizes or
initiates an asset-backed security transaction to retain a
portion (generally, at least five percent) of any credit risk
that the person conveys to a third party. Securitizations
would also be affected by rules proposed by the SEC to
implement the Dodd-Frank Act’s prohibition against
securitization participants engaging in any transaction that
would involve or result in any material conflict of interest
with an investor in a securitization transaction. The
proposed rules would exempt bona fide market-making
activities and risk-mitigating hedging activities in
connection with securitization activities from the general
prohibition.
The SEC, FINRA and regulators in various non-U.S.
jurisdictions have imposed both conduct-based and
disclosure-based requirements with respect to research
reports and research analysts and may impose additional
regulations.
Swaps, Derivatives and Commodities Regulation
The commodity futures, commodity options and swaps
industry in the United States is subject to regulation under
the U.S. Commodity Exchange Act. The CFTC is the
federal agency charged with the administration of the CEA.
In addition, the SEC is the federal agency charged with the
regulation of security-based swaps. Several of our
subsidiaries, including GS&Co. and GSEC, are registered
with the CFTC and act as futures commission merchants,
commodity pool operators, commodity trading advisors or
(as described below) swap dealers, and are subject to CFTC
regulations. The rules and regulations of various self-
regulatory organizations, such as the Chicago Board of
Trade and the Chicago Mercantile Exchange, other futures
exchanges and the National Futures Association, also
govern the commodity futures, commodity options and
swaps activities of these entities. In addition, Goldman
Sachs Financial Markets, L.P. is registered with the SEC as
an OTC derivatives dealer and conducts certain OTC
derivatives activities.
The Dodd-Frank Act provides for significantly increased
regulation of, and restrictions on, derivative markets and
transactions. In particular, the Dodd-Frank Act imposes the
following requirements relating to swaps and security-
based swaps:
‰Real-time public and regulatory reporting of trade
information for swaps and security-based swaps and
large trader reporting for swaps;
‰Registration of swap dealers and major swap participants
with the CFTC and of security-based swap dealers and
major security-based swap participants with the SEC;
‰Position limits, aggregated generally across commonly
controlled accounts and commonly controlled affiliates,
that cap exposure to derivatives on certain physical
commodities;
‰Mandated clearing through central counterparties and
execution through regulated exchanges or electronic
facilities for certain swaps and security-based swaps;
‰New business conduct standards and other requirements
for swap dealers, major swap participants, security-based
swap dealers and major security-based swap participants,
covering their relationships with counterparties, internal
oversight and compliance structures, conflict of interest
rules, internal information barriers, general and trade-
specific record-keeping and risk management;
18 Goldman Sachs 2015 Form 10-K