Tuesday, May 11, 2021

Live by the Sword. Die by the Sword. Part 1

How the Online Gamestop Crowd Missed the Big Picture

Author: David Schwartz

January's GameStop frenzy, where amateur online retail traders took what they hoped would be a rollicking joyride through the world of high finance, has left regulators scratching their heads about what to do next and the retail buccaneers themselves with quite a hangover. Some of the online buccaneers have made their next move clear and filed a class-action lawsuit against seemingly everyone who's anyone in the world of retail and wholesale securities trading. The lesson to take away from the GameStop frenzy may be that structures, securities finance markets, and participants reacted to the online investors' disruptive and provocative activity as they should have. Collusion or conspiracy was not necessary to prompt the built-in guardrails and circuit-breakers to engage. They could not have been expected to react otherwise. The online buccaneers have perhaps learned that what you don't know can, indeed, hurt you. And when you live by the sword, you die by the sword. 

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Friday, April 23, 2021

Fund Advisers Brace for ESG Scrutiny

SEC to Mandate More Public Disclosure of Proxy Votes

Author: David Schwartz
After nearly twenty years of study, the Securities and Exchange Commission seems poised to rewrite the rules on proxy disclosure for mutual funds. Two SEC commissioners predicted within days of each other that there will be radical revisions to how regulated investment companies will report their proxy voting behavior. Both Acting Chair Allison Herren Lee and Commissioner Caroline Crenshaw said in separate speeches last month that the SEC's current proxy reporting form is not meeting the needs of investors. Shareholders, they said, need more and better proxy voting information to evaluate whether fund managers are sticking to the fund's stated proxy policies, especially funds that have made commitments to ESG principles. 
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Monday, April 12, 2021

SEC's ESG Momentum Turns to Proxy Voting

Proxy Regulations Haven't Kept Pace with the New Landscape

Author: David Schwartz

Allison Herren Lee, the Securities and Exchange Commission's acting chair, called for more disclosure and transparency about proxy voting by mutual funds and institutional investors to ensure they line up with shareholder sentiment, particularly environmental, social, and governance (ESG) issues.

 

In her remarks before the Investment Company Institute's annual Mutual Fund and Investment Management Conference on March 17, 2021, Lee said that the SEC's proxy voting "regulations haven't kept up with what is a new landscape of institutional investor-driven corporate governance." Consequently, she announced that the SEC would focus on strengthening shareholder democracy by updating its rules and guidance surrounding proxy voting and corporate governance — including clarifying the proxy voting responsibilities of investment advisers and making existing proxy reporting more accessible and understandable to the now more expansive universe of investors. 

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Saturday, April 3, 2021

The SEC Puts ESG Mutual Funds to the Test

SEC Unfolds a Larger Plan to Police Sustainable Finance

Author: David Schwartz

Interest in ESG investing and the broader area of sustainable finance has exploded over the past few years. Both institutional and retail investors are clamoring for ESG investment options. According to one recent Morgan Stanley survey, 95% of millennials and 85% of all investors are now interested in sustainable investing strategies. Consequently, the highly competitive mutual fund industry has gone into overdrive, creating ESG mutual funds to attract these investors. Given the high demand and the growth of new mutual funds aimed at these ESG-conscious investors, it was only a matter of time before the regulators noticed. Over the past year, the SEC has been unfolding a larger plan to police and regulate sustainable and ESG finance. 

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Tuesday, March 30, 2021

Reddit Trading and Resilience in U.S. Equity Finance

Part 3. Real-time in GameStop: Realistic, ask Operations Experts?

Author: Ed Blount

Pressure is growing on industry and government to respond to 2021’s extreme stock market volatility. Following on the controversy around the GameStop retail buy-side suspensions, one of the remedies being discussed is shortening of the settlement cycle and, perhaps, even a shift to real-time settlement in the US equity markets. Yet the practicality of the situation is that most of the banks and dealers in the securities financing sector just can’t operate real-time in today's environment. The timeline for financing activity, which underpins much of the trading by professionals in today's markets, as well as the lending of securities by institutional investors, cannot easily be compressed. For that reason, equity financing's capabilities are prime considerations for any change in the market infrastructure. Yes, trades can be executed in real-time, but trades are not the same as loans.

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