Tuesday, October 20, 2020

Squaring ESG with Securities Lending

Compliance without Knowing the Borrower's Purpose - Is it Possible?

Author: David Schwartz

Sustainable investing is becoming more important to investors when creating portfolios. As a result, institutions often follow policies with formal environmental, social, and governance (ESG) factors to guide their investments. They commit substantial resources to ESG research and produce comprehensive reports about their compliance.[1] But then the same institutions give away their proxy votes when they lend securities for fees to cover their bank charges. And the loans of those securities – and their proxies – go to borrowers with unknown intentions, and often with unknown identities.

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Wednesday, September 30, 2020

Alarm Raised on Stock Loans for "Withholding Tax Schemes”

Findings Point to a New Role for Emerging Fintech

Author: David Schwartz

European commissioners are reviewing a study from their securities and market authority (ESMA) that includes a recommendation for new laws to combat unfair trading practices and an extended remit for National Competent Authorities (NCAs) to conduct snap audits of securities loans and transactors. Loans deemed to be suspicious would prompt an inquiry to determine penalties for unfair strategies and inappropriate beneficiaries. However, useful audit results may be doubtful based on our preliminary review that uncovered shortcomings in the proposed SFTR surveillance datasets, as well as possible flaws in the study’s basic methodology. 

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Sunday, February 26, 2017

Fintech Poised to Create a New Financial World

IOSCO Report Looks at Intersection of Fintech and Financial Regulation

Author: David Schwartz

“Fintech,” or financial technology," is a term that seems to be on everyone's lips these days, from bankers to global finance ministers.  Dramatic advances in computing power, speed, interoperability, and nearly instantaneous internet communication are changing the ways banks, brokers, and other financial institutions relate to their customers, investors, regulators, and each other. But what do these changes mean to the future of financial markets and regulation?  In February 2017, the International Organization of Securities Commissions (IOSCO) published a document that ambitiously charts the bewildering array of fintech innovations and describes how these innovations are beginning to intersect with securities markets regulation. Based on industry surveys, the report looks at the most important technological innovations affecting global finance and makes some observations about regulatory responses.

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Thursday, April 14, 2016

OCC Seeks to Bring Some Order to Financial Innovation

A Whitepaper on the Elements of "Responsible Innovation"

Author: David Schwartz

Banking and financial markets have always been innovative. But globalization, new regulation, and changes in technology have heightened the pace of innovation dramatically.  According to a whitepaper published in March 2016 by the Office of the Comptroller of the Currency (OCC), while banks continue to innovate, "rapid and dramatic advances in financial technology are beginning to disrupt the way traditional banks do business."  In the face of this disruption, the OCC has used this white paper to enumerate eight "guiding principles" that the agency says it has formulated "to guide the development of its framework for understanding and evaluating innovative products, services, and processes that OCC-regulated banks may offer or perform." 

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Tuesday, January 5, 2016

Transfer Agent Regulation Poised to Step Into the 21st Century

Author: David Schwartz

On December 22, 2015, the Securities and Exchange Commission left a present in all our stockings with its publication of a 208-page advanced notice of proposed rule making and concept release on the regulation of transfer agents. Modernizing the aging rules for transfer agents has been rumored for awhile, but no doubt fell behind other priorities related to the financial crisis and Dodd-Frank mandates.  Commissioner Luis Aguilar and now former Commissioner Daniel Gallagher have both been fairly vocal about the need for new transfer agency rules.  Both would have preferred an actual rule proposal, but apparently will have to settle for an advanced notice/concept release at this stage.  

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