Wednesday, October 19, 2016

Rare Win in Court for Wall Street Bank

$1bn Lawsuit Tests the Limits of Suitability

Author: David Schwartz

On October 14, 2016, London’s High Court of Justice handed down a ruling in favor of the UK subsidiary of Goldman Sachs, ending a three-year challenge by the US$60 billion Libyan Investment Authority (LIA).  The decision comes after a judge rejected claims by the sovereign wealth fund that the bank's nine synthetic derivatives, crafted in 2007 and 2008, were intended to be so complex as to exploit its staff's limited financial know-how. The bank's willingness to defend itself not only reverses a long string of out-of-court settlements by Wall Street banks, but may also stiffen the resolve of other banks' legal staffs. LIA's claims rest upon a theory of suitability that will no doubt be tested further in the post-reform litigation era. 

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Sunday, October 2, 2016

Reforming the Asset Management Industry is a Global Challenge

Author: David Schwartz

SEC Chairman Mary Jo White used the occasion of her keynote speech a the September 21, 2016 International Bar Association’s annual conference to address some the challenges the Securities and Exchange Commission faces in regulating an ever more global asset management industry.  With U.S.-registered asset managers increasing their activities in Europe, Africa, and Asia Pacific, the SEC has partnered with IOSCO, the FSB, and others to take transformative steps to modernize regulation of the asset management industry on a more global scale.


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Monday, September 19, 2016

Has Crisis Regulation Made Banks Less Safe?

Regulations Based on Flawed Assumptions May Make Banks Riskier

Author: David Schwartz

The response to the financial crisis was a raft of new regulation aimed at reducing the risks posed by financial institutions. But now with strict new liquidity and leverage ratios, increased capital requirements, and restrictions on banking activities versus investing activities, are banks safer than they were prior to the crisis?  In a paper published for the September 15 and 16, 2016 BPEA conference, Harvard’s Natasha Sarin and Larry Summers try to answer that very question. 

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Friday, September 9, 2016

GFMA Measures the Costs of Basel Reforms

Recommends a Period for Observation and Adjustments to Basel Rules

Author: David Schwartz

On August 10, 2016, the Global Financial Markets Association (GFMA) released a comprehensive analysis of the potential costs of the new Basel standards on lending and capital markets. The report was conducted by Oliver Wyman, a  leading global management consulting firm, on behalf of GFMA and represents a comprehensive review of the existing literature on the effects of the Basel III standards on capital markets and banking activities. Given the volume and rapidity of regulatory changes in response to the financial crisis and the complexity of the global financial system, GMFA felt it was necessary to have a better understanding of the costs of reforms, both intentional and unintentional.  

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Friday, September 2, 2016

A First Step Toward Permanent Securities Lending Data Collection

Author: David Schwartz

As we reported in April of 2015, the Office of Financial Research, the Federal Reserve, and the Securities and Exchange Commission launched a joint pilot program to collect better and more complete data on securities lending.  At that time, the OFR, Fed, and SEC created a task force to reach out to agent lenders to collect data on loans, terms, and collateral uses. On August 23, 2016, the task force published the results of their joint voluntary data collection project.    

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