The Dodd-Frank financial reform law could take years to implement as regulators bicker over how to interpret the legislation nearly three years after it was enacted, a top regulatory official tells the FOX Business Network.

Daniel M. Gallagher, a commissioner at the Securities and Exchange Commission, said regulators at both the SEC and the Federal Reserve are still at odds over several important provisions of the law, including a rule that bars banks from engaging in so-called proprietary trading, known as the Volcker Rule. The infighting has delayed the law’s full implementation indefinitely, Gallagher said.

“The SEC has roughly 100 pieces of Dodd-Frank regulations to go through, and we are only a third of the way through,” Gallagher told FOX Business. “The lack of implementation is a major problem. We have years worth of work ahead of us.”

Perhaps the biggest frustration for regulators involves the Volcker Rule, named after Paul Volcker, a long-time Fed chairman and a former economic advisor for President Barack Obama. The rule was designed to end risky Wall Street trading practices that led to the 2008 financial crisis, but officials at the Fed and the SEC are at odds over exactly what activities it might prohibit. Under the strictest interpretation of the rule, banks would no longer be able to “make markets” or buy securities and hold them on their balance sheets to satisfy the needs of their customers.

The SEC has received 19,000 comment letters regarding the Volcker Rule, one of the more controversial aspects of the Dodd-Frank Act. Volcker recently said in a speech that he “is betting on” the full implementation of the Volcker Rule by June, the third anniversary of Dodd-Frank being passed by Congress and signed into law by President Obama.

But Gallagher called Volcker’s timetable “unrealistic,” saying it is a “jump ball amongst regulators.”
In the meantime, large firms on Wall Street, including J.P. Morgan Chase (JPM) and Bank of America (BAC), have been interpreting both the Volcker Rule and other aspects of the law the way they think it should be implemented.

One problem with Dodd-Frank, Gallagher said, is that much of the law focuses on banking practices that were not at the heart of the 2008 financial crises. For example, the proprietary trading banned under the Volcker Rule played just a small part in the massive losses that led to the implosion of some banks and the subsequent government bailouts.

Gallagher said lawmakers would have been wiser to address the root causes of the financial crisis, such as the housing bubble and the role of the government sponsored entities Fannie Mae and Freddie Mac in perpetuating risky bank lending practices involving home ownership. He believes much of the law should be scrapped and “re-proposed” after taking into account criticisms from the financial industry. 

A spokeswoman at the SEC declined to comment. A press official at the Fed did not return a call for comment.

Follow Julie VerHage on Twitter @julieverhage.