All - Center for the Study of Financial Market Evolution (CSFME)

Global Financial Reform: Unintended Adverse Consequences in Connected Markets

by David Schwartz J.D. CPA | Friday, February 19, 2016 | All, Commentary

Financial markets in the 21st Century are profoundly global. This fact was amply demonstrated by the 2007 – 2009 financial crisis, which was centered in the banking systems of the developed western economies but transmitted with devastating effect to economies worldwide. And yet, despite the global consequences of systemic risk transmission, the supervision of financial markets remains essentially a national discipline.

A First Step Toward Permanent Securities Lending Data Collection

by David Schwartz J.D. CPA | Friday, February 19, 2016 | All, Change Overview and Rationale

As we reported in April of 2015, the Office of Financial Research, the Federal Reserve, and the Securities and Exchange Commission launched a joint pilot program to collect better and more complete data on securities lending. At that time, the OFR, Fed, and SEC created a task force to reach out to agent lenders to collect data on loans, terms, and collateral uses. On August 23, 2016, the task force published the results of their joint voluntary data collection project.

B of E Issues Consultation on Systemic Risk Buffer for Ring-Fenced Banks

by David Schwartz J.D. CPA | Sunday, February 14, 2016 | All, Change Overview and Rationale, Formal Regulatory Remedies

On January 29, 2016, the Bank of England (B of E) issued a consultation paper laying out its proposed framework for the systemic risk buffer (SRB) to be applied to ring-fenced banks and large building societies holding more than £25 billion of retail and small and medium enterprise deposits. The proposals are intended to provide clarity to banks on how much capital they will be required to reserve in connection with the activities of their “ring-fenced” arms.

OFR Report Highlights Unintended Consequences of Swaps CCPs

by David Schwartz J.D. CPA | Wednesday, January 27, 2016 | All, Change Overview and Rationale, Formal Regulatory Remedies

On January 27, 2016, the Office of Financial Research (OFR), an arm of the Treasury Department created under the Dodd-Frank Act, issued its fourth annual report to Congress. The report highlights the results of OFR research, risks to financial markets, and OFR priorities for the coming year. Notable among its findings, the report suggests that reforms mandating central counterparties in the formerly OTC swaps market could unintentionally increase systemic risk in the long run rather than reducing it.

FINRA and SEC to Focus on Advisor Fees

by David Schwartz J.D. CPA | Tuesday, January 19, 2016 | All, Change Overview and Rationale, Disclosure Regimes, Formal Regulatory Remedies

Both FINRA and the Securities and Exchange Commission have indicated a renewed interest in the fees charged by investment advisors. In a May 2016 notice, FINRA announced a mutual fund fee waiver sweep intended to gather information regarding whether advisors had mechanisms in place to ensure that mutual fund investors are receiving promised fee waivers and reimbursements. The SEC’s investor advocate Rick A. Fleming announced in his annual report to Congress published on June 30 that improved disclosure of fees and expenses charged by financial advisers is a top priority for his office in the new fiscal year.

US and EC Agree on a Common Approach to Trans-Atlantic CCPs

by David Schwartz J.D. CPA | Tuesday, January 19, 2016 | All, Change Overview and Rationale, Formal Regulatory Remedies

In a joint statement issued on February 10, 2016, the European Commission (EC) and the U.S. Commodity Futures Trading Commission (CFTC) announced agreement on a common approach regarding requirements for central clearing counterparties (CCPs). The agreement is the result of a multi-year analysis of differences between the CFTC and EU regulatory requirements. The accord commits the EC and CFTC to base regulations on international rather than parochial principles, and for both the CFTC and the European Commission Services to work together, along with counterparts across the global regulatory community, to develop further these principles and further harmonize the standards to which internationally active CCPs are held.

Software Bug Leads to SEC Censure

by David Schwartz J.D. CPA | Tuesday, January 19, 2016 | All

On January 14, 2016, the SEC announced that a large U.S. broker dealer had agreed to settle charges that its securities lending practices violated federal securities regulations. According to the SEC’s order, the dealer violated Regulation SHO by providing “locates” to customers without an adequate review as to whether the securities could be borrowed reasonably at settlement.[1] As a result, some customer short sales may have been executed improperly.

Pushback on SEC Liquidity Proposals

by David Schwartz J.D. CPA | Monday, January 18, 2016 | All, Change Overview and Rationale, Formal Regulatory Remedies

The Securities and Exchange Commission’s September 2015 rule proposals addressing mutual fund liquidity issues have not been received with great enthusiasm by the fund industry. Some major players have made it quite clear in their comment letters that they feel the SEC has missed the mark with this proposal.

OCC Report Highlights Lingering Risks and Supervisory Priorities

by David Schwartz J.D. CPA | Tuesday, December 29, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

Strategic, underwriting, cybersecurity, compliance, and interest rate risks lead the Office of the Comptroller of the Currency’s (OCC) supervisory concerns in its Semiannual Risk Perspective for Fall 2015. Released December 17, 2015, the report “addresses key issues facing banks, focusing on those that pose threats to the safety and soundness of banks and their compliance with applicable laws and regulations.” The report notes among its conclusions that the risks associated with underwriting and cybersecurity are increasing, and while strategic, compliance, and interest rate risks remain stable, they too remain supervisory priorities for 2016.

Lawmakers Fail to Stop the DOL’s New Fiduciary Standard from Moving Forward

by David Schwartz J.D. CPA | Monday, December 21, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

Foes of the DOL’s proposed fiduciary rule suffered a setback last week when the House of Representatives passed an omnibus spending bill omitting any measures that would have stalled, hindered, or killed the proposal. On the table during budget negotiations were riders and amendments to the bill that would have defunded the proposal, required a new comment period, or proposed an alternative standard altogether. The new standard’s proponents, including the DOL, SEC, and the Obama administration say that the rule proposal which would require brokers to put their clients’ interests ahead of their own in 401(k) and individual retirement accounts is vital to protecting workers saving for retirement from high-fee products that erode their savings.

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