Wednesday, February 3, 2021

EU Tips the Scales toward ESG-Friendly Financial Firms

SFDR is About to Set off a Competitive Frenzy

Author: David Schwartz

The European Union has embarked on an aggressive legislative push to make environmental, social, and governance (ESG) considerations as a focus of financial services industry regulation. The first salvo in the EU push, the Regulation on Sustainability-Related Disclosures in the Financial Services Sector (SFDR), was finalized in December of 2019, with an implementation deadline for key provisions (Level 1) on March 10, 2021. The new regulation is broadly applicable to almost any type of asset manager, including investment firms, banks, pension funds, and insurance companies. The effect of SFDR is expected (and may even be intended) to be felt beyond the financial sector, shifting market appetites toward ESG-friendly companies, giving such companies a competitive advantage in the ability to raise capital in the corporate finance market.

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Tags: EU, ESG

Monday, February 1, 2021

An Existential Moment for Securities Finance

Gamestop and the Debate about the Clearing System

Author: Ed Blount

Feb 1, 2021: The social controversy over Gamestop’s (GME) battle of wills — r/wallstreetbets v 'The Shorts' — may well harden the scrutiny of regulators and litigators toward the US$2.4 trillion global equity finance ecosystem that supports hedge fund strategies. This is a pivotal moment, not only for GME and The Shorts, but also for the clearing systems that their lenders and agents use to secure the funds' trade settlements and financings. 

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Sunday, December 20, 2020

Compliance with the DOL's New Proxy Rules May Stump ERISA Fiduciaries

A counter-revolution in ESG Investing?

Author: David Schwartz

On Friday, December 11, the Department of Labor (DOL) issued its final rules on proxy voting by ERISA fiduciaries. As proposed last August 30, the draft rules drew hundreds of responses by the ESG-directed investing community, many of which criticized as unworkable the DOL proposal. The final version of the rules eliminates the need for plan sponsors to weigh the economic vs. non-economic effects before casting their proxy votes. Yet that softer, principles-based approach may itself create compliance problems for ERISA fiduciaries -- and may not even survive the first hundred days of the Biden administration.

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Monday, November 9, 2020

EU Tax Officials to Audit Securities Finance

Search for WHT Abusers Will Upend Regulatory Infrastructure

Author: Ed Blount

ESMA has recommended that the market regulators in EU Member States combine trade data generated from the Securities Finance Transaction Regulation (SFTR) with local surveillance data and empower tax authorities to catch and indict tax abusers. To the abusers, that is like saying that the Sheriff and Posse are closing in on their SFTR trails. (No kidding. What did they think? So if the abusers haven’t created defenses by this time, it’s already too late.) To the legitimate lenders, it’s like, ok, can I work within these new rules? Institutional lenders will ask, "What effect does it have on my lending income?" Their agents will ask, "What effect will this have on my and career, especially if my firm cannot meet the higher disclosure standards implied by the prospect of tax audits?

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Friday, October 30, 2020

Regulators Want ESG Funds to Justify their Strategies

Author: David Schwartz

Today the Department of Labor (DOL) issued final rules clarifying the regulatory guideposts for fiduciaries of private-sector retirement and other employee benefit plans in light of recent trends involving environmental, social, and governance (ESG) investing. The DOL is not the only regulator with ESG funds in their cross-hairs. The Securities and Exchange Commission (SEC) has begun verifying asset managers’ and mutual funds’ ESG strategies through examination and is considering amending the mutual fund “name test rule” to ensure funds are living up to their ESG promises to shareholders.

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