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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Wednesday, July 3, 2019

ESMA Takes a Look at Tax Withholding Schemes

Proposes Some Best Practices and Promises a Follow-up Study

Author: David Schwartz

The European Securities and Markets Authority (ESMA) has published the findings of its preliminary study of multiple withholding tax (WHT) reclaim schemes. ESMA conducted this preliminary study at the request European Parliament (EP) and has launched a formal inquiry to gather further evidence from national competent authorities (NCAs) on the supervisory practices and experience regarding those schemes.

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Wednesday, November 22, 2017

Funds enlist Vendors to Hike the Stakes in $50 billion Class Action vs Dealers

First Impressions of amended complaint shows counsel got advice from data vendors.

Author: Ed Blount

A putative class action suit filed in August 2017 alleges that U.S. investment banks and broker-dealer units of global banks conspired to restrain competition in the domestic stock lending markets. (Read our review here.) The fact that a Connecticut hedge fund and Los Angeles County’s pension system have joined the suit is the development that has captured the media headlines. However, the risk to banks’ profits is the real story here.

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Tuesday, August 22, 2017

Pension Funds File Sweeping Securities Lending Class Action

Allege collusion by the largest prime brokers

Author: David Schwartz

Three U.S. pensions have filed a class action suit against the largest prime brokers alleging collusion to fix fees and stifle competing electronic platforms in securities finance. This suit follows the theme of other class actions involving allegations of collusion and manipulation amongst the biggest global banks in relation to LIBOR, municipal bonds, Forex, and interest rate swaps. The suit filed was filed August 16, 2017 in the US Southern District Court of New York as an anti-trust action by the Iowa Public Employees’ Retirement System, Orange County Employees Retirement System, and Sonoma County Employees’ Retirement Association. The unusually detailed yet virtually unsourced complaint alleges that six major lending agent banks created a “working cartel” to capture 76 percent of securities lending business, force out competing platforms, and inflate fees.  

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