Tuesday, August 20, 2013

Mutual Funds Get Guidance and Relief for Commodity Investments

Author: David Schwartz J.D. CPA

Given their strict regulatory regime, the use of commodities has long been a sticky subject for mutual funds. At the same time, however, the competitive environment for returns amongst mutual funds has made use of derivatives and commodity interests by registered investment companies much more common, with even funds that previously eschewed these instruments finding them useful and necessary. Over the past five or so years, and particularly so since the financial crisis, regulators have become more and more concerned about the accompanying risk and leverage that derivatives and commodities bring to mutual funds, as well as the ways funds are disclosing - or not disclosing - to shareholders the risks they are taking by using them.  Last week, the Division of Investment Management issued long awaited guidance on the use of commodities by registered investment companies. Entitled, "Disclosure and Compliance Matters for Investment Company Registrants that Invest in Commodity Interests," the guidance is intended to assist those funds in preparing disclosure filings and in their consideration of compliance issues. Virtually simultaneously, the CFTC has approved rules applicable to mutual funds investing in commodities to help ease the burden of dual regulation by the SEC and CFTC of those activities.

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Wednesday, August 14, 2013

August 2013 Financial Services Legislative Update

Author: David Schwartz J.D. CPA
As they depart for the August recess, Congress has left some financial regulatory issues open to occupy their time upon their return next month.  Bills addressing high frequency trading, exempting banks as municipal advisers, and relief for brokers engaging in private mergers and acquisition transactions remain open items for the new session.  In addition, Congress is still waiting for answers from the SEC and CFTC regarding new cross-border derivatives regulations.
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Thursday, April 18, 2013

Can the Right Statistics Help Us Avoid the Next Titanic Disaster?

Author: David Schwartz J.D. CPA
The latest financial crisis was marked by a spectacular lack of understanding about the astounding levels of risk that had been allowed to build up throughout the system. Regulators and risk managers realized after the fact that the data they needed to understand the scale, let alone the nuances, of what went wrong just had not been collected, or was obscured or insufficient. With the benefit of hindsight, and as we move into recovery, it is time to think about what role could new statistics play in heading off the next big market crisis. Claudio Borio of the Bank for International Settlements has put together an interesting treatise exploring the priorities we should be setting for new statistics and data sets that may very well help us avoid the next iceberg.
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Monday, February 4, 2013

FASB Tries to Eliminate Shenanigans When Accounting for Repos

Author: David Schwartz J.D. CPA
At this point, we're basically saying all repos should be accounted for as borrowings.
FASB Chairman Leslie Seidman


On January 15, 2013, the Financial Accounting Standards Board (FASB) proposed changes to accounting standards for repos intended to improve financial reporting disclosures and more properly reflect a company's obligations and risks. They also will clarify guidance for distinguishing between transactions that are essentially sales that can be moved off the balance sheet and on-balance sheet secured borrowings. 

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Wednesday, January 16, 2013

EC Crosses the Rubicon into Regulation of OTC Derivatives and Investment Advisers

Author: David Schwartz J.D. CPA
On December 19, 2012, the European Commission adopted technical standards on the European Markets Infrastructure Regulation (EMIR) as well as a Delegated Regulation supplementing the Directive on Alternative Investment Fund Managers (AIFMD) (called "Level 2 measures").  These two measures have been under formulation and consideration since 2010, and the technical standards adopted on December 19 meet important preconditions to implementing EMIR and AIFMD throughout all EU member countries.
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