Thursday, October 14, 2021

DOL to Reverse Rules "Chilling" ESG Investing and Proxy Voting

Author: David Schwartz

The U.S. Labor Department (DOL) has proposed regulations that would greatly expand how retirement and pension plans can invest in ESG strategies and clarify the scope of ERISA plans' responsibility for proxy voting.  If adopted, the DOL's proposal, drafted by the Employee Benefits Security Administration (EBSA), will reverse the former administration's regulations on ESG factors in retirement portfolios and ERISA fiduciaries' use of proxy voting powers in favor of social or political goals. 

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Wednesday, October 13, 2021

SEC Expands Investment Company Proxy Disclosures

New Light on Funds' Securities Lending versus Proxy Voting

Author: David Schwartz

On September 29, 2021, the Securities and Exchange Commission issued a proposal to expand investment company disclosures of their proxy voting activities. If adopted, the rules would enhance the information mutual funds, exchange-traded funds, and other regulated investment companies are required to report on Form N-PX under the Investment Company Act. These expanded disclosures are intended to make proxy voting decisions made by investment company advisers more complete, accessible, and understandable to investors. 

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Friday, September 24, 2021

Reddit Trading and Resilience in U.S. Equity Finance

Part 4. ESMA expands short sale disclosures and rules for borrower locates

Author: Ed Blount

Paris, September 24, 2021 - The next shoe has fallen in reaction to the January 2021 GameStop short squeeze, by which certain online brokers interpreted clearinghouse rules to necessitate suspension of their retail customers’ ability to buy “meme stocks." Today, the European Securities Markets Authority (ESMA), citing SEC and EU data for January 2021 on suspiciously high levels of failed meme stock settlements, asked for public comment on rule changes to avoid future short squeezes. This ESMA consultation on systemic risk management will surely propel industry leaders to advance their previously-announced plans for a block-chained securities market infrastructure, so as to add even more robust operating and disclosure protocols.

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Wednesday, August 11, 2021

Unweaving a Tangled Web

Another Reason to Map Securities Loans

Author: Ed Blount

The German Federal Court of Justice's decision two weeks ago to prosecute as criminals anyone who abused dividend arbitrage trades anytime over the previous 25 years is bad news for everyone in the securities lending community. The German tax authorities' new determination to conduct sweeps of securities loans that span dividend record dates should in particular sound the alarm for institutional securities lenders, especially if it presages a new trend among regulators.

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Sunday, August 8, 2021

Germany Throws the Book at Tax Criminals

Cross-border Securities Loans Targeted by EU Tax Auditors

Author: David Schwartz

German courts and regulators have put securities lenders on notice that cross-border withholding tax (WHT) reclaim "schemes" are now "crimes." Recent developments in Germany have cleared the way for sweeping tax audits and potential criminal prosecutions of borrowers and lenders reaching back 25 years. The so-called "cum-ex" trades have been a focus of European regulators, particularly in Germany and Denmark, whose treasuries have been hit hardest by these trades. Lenders are being advised that there is new potential for legal and criminal jeopardy attached to cum-ex securities lending transactions and that principals and their service providers should be ready for heightened scrutiny.

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