WASHINGTON — Nearly three months after the Dodd-Frank law created the Financial Stability Oversight Council, its first official meeting Friday was not exactly auspicious.

On the one hand, the council took tentative steps forward on two crucial issues — establishing criteria to determine which nonbank financial companies are systemically risky and to enforce a ban on proprietary trading.

Yet its proposals were filled with questions that obscure any insight on how the council plans to move forward.

The meeting itself, a portion of which was open to the media, had a nearly funereal atmosphere, with little to no substantive discussion of the proposals and a series of vague opening statements pledging cooperation. Regulators were not even sure when they must complete a study on the Volcker Rule, and the meeting's proceedings appeared distinctly ad-hoc by contrast with the more regimented procedures at Federal Reserve Board and Federal Deposit Insurance Corp. meetings.

About the only regulator to weigh in was Gary Gensler, the chairman of the Commodity Futures Trading Commission, who appeared alarmed when Treasury Secretary Tim Geithner — after consulting with Securities and Exchange Commission Chairman Mary Schapiro — told him a study on how to enforce the Volcker Rule would be due at the end of January.

"I encourage the public to send in the comments fast," Gensler said.

The lack of comment may reflect how little time regulators had with the proposals themselves. Some agencies did not receive them until late Thursday and were asked to give feedback by early Friday.

Still, several industry observers saw signs that the council was at least taking a cautious approach to some tough issues.

"They've got a real dilemma," said H. Rodgin Cohen, a partner and the senior chairman at Sullivan & Cromwell. "They have been left with a large number of questions to explicitly answer and numerous ambiguities in the statute. Going out and getting industry input and moving quickly — that's what they should be doing, not coming out with rules without input, without time to think it through. As much as people want certainty, they don't want a regulatory system that doesn't work."

The proposals were largely seeking outside input on how best to craft rules required by Dodd-Frank.

The Volcker Rule proposal, asks bankers broad questions on how best to impose a proprietary trading ban and restrict investment with hedge funds and private-equity firms.

The proposal asks how to protect taxpayers and consumers by minimizing risks that firms take on, how to limit activities that have caused undue risk or loss to banks and what is the appropriate time for divestiture of illiquid assets affected by the ban.

The plan also asks whether additional capital and quantitative limitations are appropriate to protect banks that engage in activities permitted by the Volcker Rule and what safeguards should be taken to guard against evasion of the prohibition. The proposal seeks comment on how to define banking entities, hedge funds, private equity funds and proprietary trading.

The questions mostly mirrored those that the Dodd-Frank Act required the council to consider in its study. The council also asked for input on how to define key terms such as "proprietary trading" and "conflicts of interest."

Under the law, the council must study and make recommendations about how to implement the Volcker Rule by Jan. 22. Regulators then have nine months after that point to implement the rule. The proposal approved Friday, which is intended to help regulators write the study, will be out for comment for 30 days after it is published in the Federal Register.

But some observers worried about how fast regulators could move.

"It sounds like they are making a good faith effort on these issues," said Cornelius Hurley of the Graduate Program in Banking and Financial Law at Boston University. "The only problem is, they've already wasted three months, so by the time they get the public input, there won't be much time for analysis."

Jaret Seiberg, an analyst at Washington Research Group, a division of Concept Capital, agreed the council "is getting a late start."

"We are three months into Dodd-Frank, and the council is just holding its first meeting, so short timetables are now even shorter," he said.

Some lawmakers signaled they are watching regulators closely on the issue and expect them to hold to the timeline.

"Today, the council seemed to agree that the Merkley-Levin provisions on proprietary trading and conflicts of interest are essential to making our financial system safer by putting them at the top of its priority list," said Sen. Carl Levin, in a statement to American Banker. "Putting our provisions first on the agenda will hopefully lead to strong and comprehensive enforcement, including trade-by-trade analyses. Such comprehensive enforcement will go a long way toward preventing another crisis and future bailouts."

The council also took the initial steps to develop a framework for designating nonbank financial companies for heightened supervision by soliciting public comment over a 30-day period. Such companies would face higher capital and liquidity requirements.

The request for comment consists of 15 questions, including what metrics the council should use in its determinations, whether some factors should be weighted more heavily than others, if the council should take into account the interconnectedness of a nonbank firm and how it should assess leverage.

Regulators said this would help inform the council on how to draft a specific proposal, which is expected to be published by yearend. The council is expected to complete the process by March 31.

During the meeting, the Treasury Department's Geithner said the council was crucial to interagency cooperation and spotting risks in the system that individual regulators missed before the 2008 financial crisis.

"We all know why we are here," he said. "We had a financial crisis caused by a complicated set of factors, but part of the problem was basic barriers in our oversight regime where we had rules that were not effective in protecting consumers. … When the crisis began, we didn't have tools to contain the damage."

Separately, the council approved a transparency policy stating that all market-sensitive data on individual firms and transactions would be kept confidential. Future meetings will be closed when the council discusses law enforcement investigatory records, information that could lead to financial speculation or other private information.

The council also agreed to release a timetable for the goals of both it and the regulatory agencies. The road map says no deadline has been set to establish heightened standards, such as capital, liquidity and risk management requirements, for systemically important companies.

The council will also be required to make its first annual report to Congress by July. It will also be required to complete setup of the Office of Financial Research by then.

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