Implications for Contractors, Sub-Contractors and Non-Financial Companies— Wall Street Reform and Consumer Protection Act

Source: Berkshire Associates Inc.

The Dodd/Frank Wall Street Reform and Consumer Protection Act contains provisions in Section 342 that require federal agencies such as the Department of the Treasury, the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Finance Agency (FHFA), the 12 Federal Reserve regional banks, the Board of Governors of the Fed, the National Credit Union Administration (NCUA), the Comptroller of the Currency, the Securities and Exchange Commission (SEC), and the newly formed Consumer Financial Protection Bureau to each establish an Office of Minority and Women Inclusion.

Each of these offices will have a director and staff, and will be responsible for developing and implementing standards that help fulfill their mission, which includes assuring “to the maximum extent possible the fair inclusion” of women and minority owned businesses in programs and contracts of the agency, and fair representation in not only in the agency’s workforce, but also the workforce of the contractors and sub-contractors the agency regulates. There is a provision in the law that states a “fair” employment test will apply to “financial institutions, investment banking firms, mortgage banking firms, asset management firms, brokers, dealers, financial services entities, underwriters, accountants, investment consultants and providers of legal services.”

The law also establishes a Financial Stability Oversight Council, which will have the ability to require nonbank financial companies that pose a risk to the financial stability of the United States to submit to supervision by the Federal Reserve. The Council also has the power to (as a last resort) break up large, complex companies that potentially pose a grave threat to the financial stability of the United States. The implications of this provision are unclear at this time, but will emerge in the future if any of these companies are also covered by the Offices of Minority & Women Inclusion.

The Directors of the Offices of Minority and Women Inclusion can recommend termination of contracts or refer the matter to the Office of Federal Contract Compliance Programs (OFCCP) if the good faith efforts of contractors or sub-contractors are found inadequate in representing women and minorities in their workforce. Agencies listed above should brace for additional scrutiny during the contracts award process once the Offices at each Federal agency are staffed.