The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) celebrated its two-year anniversary this past July. At that time, the Act drew much attention from the media and political pundits because of its stated goal of bringing responsibility and accountability to the financial industry through what some viewed as burdensome and overly broad federal oversight. More recently, the Act has again become the focus of attention as employers and public contractors question the impact of the diversity and inclusion mandates set forth in Title III, Section 342 of the Act (“Section 342”). Somewhat overlooked originally, Section 342’s relative obscurity is changing quickly as its potentially broad implications are being debated on Capital Hill by the regulators and impacted industry groups.
Section 342 was proposed by U.S. Representative Maxine Waters (D–Calif.), who argued that diversity regulators in the federal agencies were necessary to help correct racial and gender imbalances at Wall Street firms, as well as imbalances in the subcontracting process. Since the Act’s passing, Rep. Walters has vowed to keep Section 342 in the forefront. In general, Section 342 applies to:
- federal financial agencies
- entities that contract with these agencies
- private financial entities that are regulated by these agencies
As discussed below, Section 342 has the potential to impact significantly the diversity practices of the covered entities.
Impacted Agencies and Creation of Offices of Minority and Women Inclusion
Central to Section 342’s mission of promoting diversity is its requirement that each of the nine major federal financial agencies create an Office of Minority and Women Inclusion (“OMWI”) “to be responsible for all agency matters relating to diversity in management, employment and business activities.” Except for the Consumer Financial Protection Bureau (“CFPB”), Section 342 requires that the covered agencies establish their OMWIs by January 21, 2011. The CFPB was given until July 21, 2012 to establish its Office, which it has done recently.
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