Perhaps the most significant of the executive compensation provisions in the Dodd Bill is the requirement that companies implement a "clawback" policy. The Dodd Bill would require listing exchanges to mandate that issuers implement a policy enabling recovery of incentive-based compensation (including stock options) paid to current or former executives during the three years preceding an accounting restatement due to material non-compliance of the issuer.

Like the Frank Bill, the Dodd Bill requires the SEC to set rules mandating that annual proxy statements include a separate resolution providing shareholders with the right to a non-binding vote approving executive compensation, commonly referred to as "say-on-pay". While the Frank Bill would also require a vote with respect to golden parachutes in any proxy relating to a corporate merger or acquisition transaction, the Dodd Bill eliminates this requirement. The Dodd Bill also provides that only votes cast by beneficial owners of a security or by members given specific voting instructions by the beneficial owner will be included in the vote tally.

Both the Dodd Bill and the Frank Bill require that all compensation consultants and advisors to the compensation committee of any issuer meet independence standards established by the US Securities and Exchange Commission (SEC). Current SEC rules govern only the disclosure relating to compensation consultant independence.

Similar to the Frank Bill, the Dodd Bill would require that each member of the compensation committee be independent from the company. To be independent, the committee member must not receive consulting, advisory or other compensatory fees (other than in the capacity of a member of the board of directors).

The Dodd Bill would direct the SEC to require additional compensation-related disclosure in annual proxy statements showing the relationship between compensation actually paid and the financial performance of the issuer, taking into account any change in the stock value and dividends paid. The SEC would also require issuers to disclose:

The Dodd Bill would address "excessive compensation" of executives of holding companies of depositary institutions. This provision requires the US Federal Reserve to prohibit as an unsafe and unsound practice any compensation plan that provides an executive officer, employee or director with excessive compensation, or a compensation plan that could lead to material financial loss to the bank holding company. The Dodd Bill does not define what compensation would be considered excessive.

If passed by the Senate, the Dodd Bill will be considered by the House of Representatives or sent to conference of the House and Senate for reconciliation.

For more information about the Dodd Bill and the Frank Bill, see:

The Bill would create the Financial Stability Oversight Council (FSOC) – as a nine-member inter-agency council – to monitor risks to the economy as a whole (that is, systemic-risks) and carry out related functions to promote financial stability. Significantly, the FSOC would be tasked with placing systemically-important non-bank institutions under Federal Reserve supervision to ensure that a future Lehman Brothers or AIG would be subject to "heightened", comprehensive supervisory scrutiny.

The Bill would provide for a special liquidation process as an alternative to the normal bankruptcy process for certain US financial companies considered systemically-important. The Bill uses the term "orderly liquidation" to emphasise the point that the troubled financial company is to be closed, rather than provided with assistance to remain open. Nonetheless, this aspect of the Bill has proven to be controversial as several Republicans have expressed concerns that certain provisions – including the establishment of a US$50 billion fund to cover liquidation costs – could leave open the possibility of a "back door" bailout.

The Bill would make changes to the regulatory and supervisory authority of the US federal banking agencies. For example, the Office of Thrift Supervision – which currently regulates federal savings banks and their thrift holding companies – would be consolidated into the Office of the Comptroller of the Currency – which regulates national banks. In addition, the Federal Reserve would lose its supervisory authority over certain US banks and smaller US bank holding companies. Arguably, these institutions are of less interest to the Federal Reserve from a systemic viewpoint and the reform would promote stability by allowing the Federal Reserve to focus on the largest organisations.

The Bill would establish the statutory framework for the US federal banking agencies to implement the so-called Volcker Rule – that is, President Obama's proposed restrictions on certain capital markets activities of, and concentration limits for, banking institutions and their affiliates. As currently drafted, the Bill would prohibit these institutions from:

Notably, however, the US federal banking agencies would have the authority to modify these restrictions based on the outcome of an FSOC study on how the Volcker Rule would impact the safety and soundness of banking institutions and financial stability.

The Bill would establish the Bureau as a new arm of the Federal Reserve for the purpose of better protecting the interests of consumers of financial products. The Bureau's supervisory reach would extend to certain types of bank and non-bank providers (including, residential mortgage originators) of consumer financial products such as deposits, residential mortgages and credit cards.

The Bill aims to enhance oversight and transparency of the derivatives market through both:

In view of concerns expressed by some Republican Senators, it is widely believed that certain aspects of the proposal – including the scope of the exemption from clearing requirements for transactions used to hedge commercial risks – could change on the Senate floor.

The Bill would eliminate the so-called "private adviser" exemption from US federal investment adviser registration currently available to advisers with fewer than 15 clients. As a result, additional hedge fund managers would likely become subject to a wide range of requirements – including, advertising, disclosure, conflict of interest, and reporting requirements – that apply to registered advisers.

For more information on this and other areas addressed by the proposed legislation, seeUS Senate Banking Committee Approves a Sweeping Financial Regulatory Reform Bill.

Chapter 15 of the bankruptcy code was codified by Congress as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Together with similar foreign laws, chapter 15 is intended to create a uniform system for recognition of foreign insolvency proceedings and co-operation of courts and administrators in insolvencies involving debtors that have assets in multiple nations. Under chapter 15, a representative of a foreign debtor's estate may apply for recognition of the foreign insolvency proceeding by a Bankruptcy Court. On recognition of a foreign proceeding, chapter 15 allows a Bankruptcy Court to grant "any . . . relief that may be available to a trustee" under the US Bankruptcy Code (Bankruptcy Code) other than relief pursuant to a trustee's avoiding powers (11 USC. § 1521).

Avoiding powers include a bankruptcy trustee's ability to, among other things, avoid preferential and fraudulent transfers as well as statutory liens. Avoiding powers often represent a significant source of recovery for a debtor's estate. Chapter 15 specifically grants a foreign representative standing to commence avoidance actions in a case under another chapter of the Bankruptcy Code, such as chapter 11 or chapter 7, on recognition of the foreign proceeding. However, chapter 15 precludes a foreign representative from utilising the Bankruptcy Code's avoidance powers within the context of the chapter 15 case (11 USC. §§ 1521, 1523).

The Joint Official Liquidators (Liquidators) of Condor Insurance, Limited (Condor Ltd), a Nevis-based insurer, filed a chapter 15 proceeding in the Bankruptcy Court for the Southern District of Mississippi. The Court recognised the Nevis liquidation proceeding and accepted the Liquidators' chapter 15 filing. The Liquidators then commenced a related adversary proceeding in the court against Condor Guaranty, Inc and other Condor Ltd affiliates and insiders (Affiliates (collectively)) alleging that Condor Ltd fraudulently transferred over US$313 million of assets to the Affiliates to keep those assets out of the hands of the Condor Ltd's creditors. The Liquidators relied on Nevis law as the basis for bringing their fraudulent transfer claims under chapter 15.

The Affiliates moved to dismiss the adversary proceeding, arguing that by specifically excluding the Bankruptcy Code's avoidance powers from the rights granted to a foreign representative in chapter 15 and by legislating that such powers could only be exercised by a foreign representative in a case under another chapter of the Bankruptcy Code, Congress intended that all avoidance actions, even if they arose under foreign law, be unavailable in a chapter 15 case. Because the Bankruptcy Code precludes foreign insurers like Condor Ltd from filing a case under chapter 7 or chapter 11, the Affiliates argued that the Liquidators' fraudulent transfer claims must fail.

The Bankruptcy Court agreed with the Affiliates and ordered that the adversary proceeding be dismissed. On appeal, the District Court for the Southern District of Mississippi reviewed the legislative history of chapter 15 and, based on that review and the language of chapter 15, upheld the Bankruptcy Court's opinion, finding that chapter 15 is "intended to exclude all of the avoidance powers specified, under either United States or foreign law, unless a Chapter 7 or 11 bankruptcy proceeding is instituted" (In re Condor Ltd., 411 B.R. 314, 319 (S.D. Miss. 2009)).

On appeal from the District Court, the Court of Appeals noted that chapter 15 "directs courts to 'consider its international origin, and the need to promote an application of th[e] chapter that is consistent with the application of similar statutes adopted by foreign jurisdictions' in interpreting its provisions" (Condor at *4; 11 USC. §1508). The Court of Appeals noted that the language of chapter 15 only specifically excludes foreign representatives from pursuing avoidance actions under the Bankruptcy Code and is silent as to the use of non-United States avoiding power laws in a chapter 15 proceeding. This silence, together with Congress's intent to promote consistent application of foreign laws in enacting chapter 15, led the Court of Appeals to find that "a court has authority to permit relief under foreign avoidance law under" chapter 15. Although no other court has ruled on the issue, the Bankruptcy Court for the Southern District of New York has noted in dicta that the District Court's reasoning in the Condor case "is open to question," indicating that courts in other jurisdictions may agree with the ultimate holding by the Court of Appeals in Condor II (In re Atlas Shipping A/S, 404 B.R. 726, 744 (Bankr. S.D.N.Y. 2009)).

The implications of Condor II for creditors in cross-border insolvency proceedings are significant. Although Condor Ltd was precluded from filing a chapter 7 or chapter 11 case because it was a foreign insurance company, the rule in Condor II may lead to foreign representatives in other insolvency proceedings analysing whether the Bankruptcy Code's avoidance powers, or avoidance powers of a foreign jurisdiction will be more advantageous to their estate and commencing avoidance adversary proceedings under chapter 7, 11, or 15 of the Bankruptcy Code depending on the result of their analysis - a practice colloquially referred to as "section shopping".

Unless another court disagrees with the Fifth Circuit, creditors analysing their potential recovery in a multi-jurisdictional insolvency or reorganisation may need to perform avoidance analyses under the avoidance laws of multiple jurisdictions to fully understand possible recoveries on their claims in the bankruptcy proceeding.