Friday, April 25, 2014

Switzerland's Say on Pay Law Could Put Swiss Pensions in a Bind

Better Corporate Governance, But at What Price?

Author: David Schwartz
On March 3, 2013, Swiss citizens voted overwhelmingly to approve the Minder Initiative, giving shareholders far-reaching influence over the executive compensation and corporate governance matters of publicly traded Swiss companies. Though the first corporate elections under the new Swiss say on pay law will not occur until 2015, institutional investors are beginning to worry potential unintended consequences. For instance, the Minder rules require Swiss shareholders to vote on the aggregate compensation of directors and senior management for each of the equities in their portfolios. This requirement could cause problems for Swiss pension funds and other Swiss institutional investors who wish to engage in securities lending. Typically, when a security is lent out, the right to vote the share passes to the borrower. Will the new law requiring pension funds to vote at the annual general meetings of companies either headquartered or listed in the country effectively prevent them from lending their Swiss securities?
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Tuesday, April 15, 2014

Controversial OFR Report Yields Some Valuable Findings

What We Don’t Know is as Dangerous as What We Do

Author: David Schwartz

The September 2013 Office of Financial Research (OFR) report entitled “Asset Management and Financial Stability” attempts to present a critical analysis of how asset management firms and the activities in which they engage can introduce vulnerabilities that could pose, amplify, or transmit threats to financial stability.  The report’s assumptions and conclusions have provoked some very strong responses from members of the asset management industry, commentators, and even some legislators. Despite the mixed reviews, the reports yields some very useful findings and analysis.

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Monday, April 7, 2014

Virtual bookshelf of Bitcoin ebooks

Book Review: Guides to a moving target

Author: David Schwartz

In his latest article for the ABA Banking Journal, Virtual Bookshelf of Bitcoin ebooks, CSFME's Executive Director Ed Blount walks us through some of the more useful resources on the Bitcoin phenomenon, from books that look at the back-office aspects of the virtual currency, to more technical and systems oriented resources.  

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Tuesday, October 1, 2013

Repo is Far from "Unregulated"

Author: David Schwartz
Repo is very much in the news lately, even coming up on the radar screen of the New York Times' Gretchen Morgenson. Morgenson penned an article in the Times' September 14, 2013 issue, After a Financial Flood, Pipes Are Still Broken, in which she worries that despite new rules on derivatives, the repo market remains largely unregulated.

And yet, for all the new regulations governing derivatives, mortgages and bank holding companies, a crucial vulnerability remains. It’s found in our vast and opaque securities financing system, known as the repurchase obligation or repo market. Now $4.6 trillion in size, it is where almost every financial crisis since the 1980s has begun. Little has been done, however, to reduce its risks. Morgenson indulges in some journalistic hyperbole to make her point, but she is not the only one concerned about the risks associated with the wholesale funding market.

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Tuesday, July 16, 2013

Are Institutional Investors Voting Proxies with the Correct Mindset?

Author: David Schwartz
The federal government is not now and has never been in the business of telling you how you should vote your proxies. But it seems that through regulatory creep, the government may have indirectly given the power to tell investors how to vote their proxies to someone else entirely. Regulating disclosures and mechanics by which we vote proxies is plainly within the scope of the Securities and Exchange Commission's mission. However, the federalization of proxy regulation may be driving institutional investors and investment advisers, to view their responsibility to vote on proxy matters with more of a compliance mindset than a fiduciary mindset. This compliance mindset has had the effect of entrenching proxy advisory firms solidly in the voting process and given them an outsized say in the way most proxy shares are voted. The federal government may not be dictating how institutional investors vote their proxies, but in a presumably unintended consequence, by regulation have given this power to proxy advisory firms.
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