Tuesday, July 22, 2014

Should Pension Funds Police Corporate Governance?

Author: David Schwartz J.D. CPA

It is often said that good corporate governance helps reduce a company’s investment risk, ensures the effective deployment of shareholder capital, and ultimately contributes to the long-term performance of public companies. . . On the other hand, the absence of a robust corporate governance infrastructure can lead to poor decisions resulting in bad outcomes for the company and its shareholders. 

SEC Commissioner Luis A. Aguilar has long been a champion of empowering shareholders to enforce sound corporate governance.  In a July 1, 2014 address before a meeting of the Latinos on Fast Track (LOFT) Investors Forum, Commissioner Aguilar once again addressed the role pension plans and other institutional investors play in ensuring that the companies they invest in make sound governance decisions.  Not only are pension funds obligated to vote their shares, according to Aguilar, but they should also work to make certain that shareholder voting rights are not restricted, and actively support measures that support shareholder rights and enhance their ability to communicate their views to management.
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Thursday, July 10, 2014

SEC Adopts Final Cross-Border Security-Based Swap Rules

Author: David Schwartz J.D. CPA
On June 25, 2014, the Securities and Exchange Commission finalized new rules and interpretive guidance addressing the cross-border application of a security-based swap regulatory framework called for under the Dodd-Frank Act.  These final rules are the first of a series of rules and guidance on cross-border security-based swap activities for market participants.  According to the SEC, these new rules will be key to finalizing the remaining outstanding proposals on security-based swaps.   The rules finalized on June 25 focus primarily on when a cross-border transaction must be counted toward the requirement to register as a security-based swap dealer or major security-based swap participant.  The rules also address the scope of the SEC’s cross-border anti-fraud authority.  Notably, in this release, the SEC can be seen to be actively moving toward a “substituted compliance” model with respect to cross-border swaps transactions. According to the SEC’s press release:   The SEC also adopted a procedural rule regarding the submission of “substituted compliance” requests.  This rule represents a first step in the SEC’s efforts to establish a framework to address the possibility that market participants may be subject to more than one set of comparable regulations across different jurisdictions as a result of their cross-border swaps activity.  If the SEC were to grant a request for substituted compliance, it would permit market participants to satisfy certain Title VII security-based swap regulatory requirements by complying with comparable non-U.S. rules. This move toward a substituted compliance approach may have some multinational swaps participants and dealers breathing a sigh of relief.   The new cross-border rules also have some teeth to them.  The final rules provide for anti-fraud enforcement authority; however, the release language is clear that...
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Thursday, April 3, 2014

SEC Proposes Rules for Systemically Important and Security-Based Swap Clearing Agencies

Proposal Reserves Great Discretion for the SEC

Author: David Schwartz J.D. CPA
“Clearing agencies that have been designated as systemically important or that clear security-based swaps are a backbone of the U.S. financial markets. The enhanced regulatory regime proposed today reflects the importance of effective regulation of these entities.” 
---SEC Chairman Mary Jo White 

The Securities and Exchange Commission voted on March 12 to propose new rules to enhance the oversight of clearing agencies that are deemed to be systemically important or that are involved in complex transactions like security-based swaps. The Dodd-Frank Act calls for a new framework of regulation for certain clearing agencies, and these rules, if adopted, would apply to SEC-registered clearing agencies that have been designated as systemically important by the FSOC. The rules would also sweep into their regulatory ambit clearing agencies not deemed systemically important, but that take part in highly complex transactions, such as clearing security-based swaps.

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Monday, February 18, 2013

Valentines Day Was No Bed of Roses for SEC and CFTC Heads

Author: David Schwartz J.D. CPA
The Senate Banking Committee spent the best part of its Valentine's Day grilling Fed officials and agency heads about the regulatory implementation of Dodd-Frank. Despite holding the hearings on a day dedicated to romance and love, the Senators certainly did not woo their witnesses with bonbons and soft questioning. The Banking Committee invited an impressive list of witnesses for the day's round of tough questions focused mainly on coordination both domestically and internationally, and the need for adequate cost benefit analysis associated with all this new regulation. Though the banking regulators received a fair share of the questioning, the heads of the SEC and CFTC received the majority of the Committee's attention.
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Monday, December 17, 2012

Exodus at the SEC May Roadblock Regulatory Efforts

Author: David Schwartz J.D. CPA
What does the exodus of senior officials at the SEC mean for the future of securities regulation?  This month, the SEC announced that the agency's chair, two division heads, and the general counsel and chief of staff will leave their posts. Though it is not unusual for political appointees, like the SEC chair and commissioners to end their tenures after a Presidential election, it is not typical that the senior staff does so.  These changes in leadership may signal a new direction for the SEC, and may also delay some regulatory efforts like money market reforms, crowdfunding regulation, and progress on Dodd-Frank regulations.  
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