Financial Reform Bill Establishes Diversity Requirements

The newly-enacted Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) contains a provision that will impose diversity requirements on businesses in the financial industry. Section 342 of the bill mandates that within six months various federal agencies that deal with financial firms, such as the Treasury Department and the Securities and Exchange Commission, establish an Office of Minority and Women Inclusion (OMWI). The director of each such office will be charged with, among other things, developing and implementing standards for ensuring “to the maximum extent possible, the fair inclusion and utilization of minorities, women, and minority-owned and women-owned businesses in all business and activities of the agency at all levels, including in procurement, insurance, and all types of contracts.”

Contractors dealing with these agencies will be required to provide a written statement attesting to the fact that they – and their subcontractors – have fairly included women and minorities in their workforces. Standards and procedures will be developed to assess whether such contractors and subcontractors have failed to make a good faith effort to do so. In this event, the director of the OMWI will have the ability to recommend that the agency head terminate the contract; make a referral to the Office of Federal Contract Compliance Programs (OFCCP); or take other appropriate action.

The applicability of this section is fairly broad. Specifically, it applies:

to all contracts of an agency for services of any kind, including the services of 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 contracts referred to in this subsection include all contracts for all business and activities of an agency, at all levels, including contracts for the issuance or guarantee of any debt, equity, or security, the sale of assets, the management of the assets of the agency, the making of equity investments by the agency, and the implementation by the agency of programs to address economic recovery.

Any company or contractor doing business with the following agencies will be affected by this new law: Departmental Offices of the Department of the Treasury; Federal Deposit Insurance Corporation; Federal Housing Finance Agency; each of the Federal reserve banks; the Board of Governors of the Federal Reserve System; National Credit Union Administration; Office of the Comptroller of the Currency; Securities and Exchange Commission; and the Bureau of Consumer Financial Protection.

Photo credit:   Ramy Majouji

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.