Tuesday, September 26, 2023

Archegos Litigation Heats Up

Rogue Trader's Collapse Still Ripples Through the Financial Industry

Author: David Schwartz J.D. CPA


Archegos Capital Management, a family office run by Bill Hwang, collapsed in March 2021, leaving its counterparties with over $10 billion in losses. The SEC, CFTC, and DOJ have all filed charges against Archegos and its executives, alleging that they engaged in market manipulation and fraud. The litigation is still ongoing, but the case has already significantly affected the financial industry.

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Saturday, October 8, 2022

Bringing Crypto Asset Activities Into the Regulatory Perimeter

Tech Innovation Meets Prudential Regulation

Author: David Schwartz J.D. CPA

A collection of the globe's most significant securities trade associations[1] joined forces to file a comprehensive response to the Basel Committee on Banking Supervision's (BCBS) second public consultation on the prudential treatment of banks' crypto-asset exposures. The September 30, 2022, letter voiced support for the design of the crypto-asset exposure framework proposed by  in its June 10, 2021, initial and follow-up June 30, 2022, consultations. However, the associations identified some elements of the proposal that they say "would  meaningfully  reduce banks' ability  to—and  in  some  cases  effectively  preclude banks  from—utilising the benefits of distributed ledger technology ("DLT") to perform certain  traditional  banking, financial  intermediation and  other  financial functions  more efficiently."

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Thursday, April 28, 2022

Regulators Drop the Hammer on Archegos

Rogue Trader's Behavior Yields Lessons for Risk Management

Author: David Schwartz J.D. CPA

The Securities and Exchange Commission (SEC) filed a civil lawsuit against Archegos Capital Management, its founder, and several other individuals in April 2022. The SEC alleges that Archegos engaged in a fraudulent scheme to manipulate the market for the securities of the issuers that represented Archegos's top 10 holdings, both through purchases of the issuers' securities and entry into total return swaps referencing those issuers. This event has led investment firms on both the buy and sell sides to reconsider how they manage counterparty and market risks and how they will structure their future securities financing and liquidity management strategies.

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Monday, December 13, 2021

“Wisely and Slow; They Stumble that Run Fast.”

Finding a Better Value Proposition for the SEC's Sec Lending Disclosure Rule

Author: David Schwartz J.D. CPA

The SEC has proposed a radical and potentially very costly reporting regime for securities finance transactions to increase transparency "to brokers, dealers, and investors."  While there is no requirement for the Commission to discuss or examine the economic effects of regulatory alternatives, in this case, they have included some alternatives it could consider to the reporting structure they propose, presumably to focus potential commenters on specific ideas they want explored. The Commission has seemingly outsourced the economic analysis of its suggested alternatives to industry commenters. Also, by doing so, the Commission has hinted it is interested in hearing about well-supported alternatives, and may even be inviting counter-proposals. 

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Friday, September 3, 2021

Central Clearing for Securities Lending

DTCC Gambles that If They Build it, they Will Come.

Author: David Schwartz J.D. CPA

DTCC has applied to the US Securities and Exchange Commission for permission to launch a securities finance clearing service. DTCC's fixed income arm, the National Securities Clearing Corporation (NSCC), spearheads the central clearing initiative, touting the numerous efficiency benefits to clearing customers, including increased capital efficiency for both borrowers and agent lenders and a reduction in counterparty risk by novating to NSCC the completion of settlement obligations.

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