Monday, November 8, 2021

Exposing the Rogue Traders

The Case for a Cross-Border Stock Loan Registry, Part II

Author: Ed Blount

Master Criminals don’t usually confess in public. If prosecutors’ charges are true, Sanjay Shah is the leading figure in the largest reported tax swindle in history. Yet, Mr. Shah, unbowed, pleading his case to reporters, has openly admitted to borrowing the assets of widows and orphans in one country to kick-start a pyramid scheme of dividend capture trades, so as to swindle widows and orphans in other countries. Mr. Shah’s attorneys argue that his trades were not illegal. Mr. Shah, according to the reporters, claims everything he did was legal, and then he appeals to the Law of the Jungle:

“If there’s a big sign on the street saying, ‘please help yourself’,
then me or somebody else would go and help themselves.”

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Number of views (1815)

Monday, November 1, 2021

A Twenty-Year Journey to Transparency

Securities Lending Versus Proxy Voting

Author: David Schwartz J.D. CPA

Securities lending has proven the most challenging aspect of shadow banking for regulators to bring under a regulatory rubric. One of the most vexing aspects for regulators is proxy voting by securities lenders or, more particularly, the lenders' decision processes about whether to recall lent securities to vote their proxies and forego the lending income. The calculus about whether to forego lending income in favor of exercising the right to vote relies on so many factors that regulators are hesitant to second-guess. Nonetheless, investors in lenders like mutual funds have a right to know how investment managers make these decisions. And now, the enormous demand for ESG investing is driving an intensifying interest in how funds are managing governance decisions. Perhaps it is time to explore more active metrics to avoid what could be more needless and ultimately unhelpful disclosure to shareholders. 

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Number of views (1639)

Monday, October 25, 2021

Assembling the Market Posse

The Case for a Cross-Border Stock Loan Registry, Part I

Author: Ed Blount

We’ve all been there, having drinks after work with an important client visiting from overseas. My most memorable time was at the very beginning of my career on Wall Street. The client was a trader from the South African branch of Jos. Sebag & Co., a London firm more than 100 years old when he and I met in 1975 at the upscale bar, Michael II. The firm and the restaurant have long since vanished, but at the time Sebag was the most active account for First National City Bank’s (FNCB) American Depositary Receipt (ADR) business. The firm was far more active than Merrill Lynch, Goldman Sachs or any other cross-border trading outfit. Most of the trades were for the issuance of ADRs in South African mining stocks, such as Anglo-American Gold.

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Number of views (3930)

Thursday, October 14, 2021

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

Author: David Schwartz J.D. CPA

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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Number of views (1773)

Wednesday, October 13, 2021

SEC Expands Investment Company Proxy Disclosures

New Light on Funds' Securities Lending versus Proxy Voting

Author: David Schwartz J.D. CPA

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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Number of views (1723)
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