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

FSB Issues its Final Policy Framework on Sec Lending and Repo

by David Schwartz J.D. CPA | Thursday, September 12, 2013 | All, Change Overview and Rationale, Disclosure Regimes, Formal Regulatory Remedies, Procedural Changes

On August 29, 2013, the Financial Stability Board (FSB) issued its finalized policy framework for its securities lending and repo workstream. As part of a larger examination of shadow banking, the FSB focused on five specific areas in which policies are needed to mitigate the potential systemic risks associated with shadow banking, with one of these five areas being securities lending and repo. Following up on their November 2012 consultation paper, the FSB has issued its final Policy Framework for Addressing Shadow Banking Risks in Securities Lending and Repos. This document sets out recommendations for addressing financial stability risks in this area, including enhanced transparency, regulation of securities financing, and improvements to market structure. It also includes consultative proposals on minimum standards for methodologies to calculate haircuts on noncentrally cleared securities financing transactions and a framework of numerical haircut floors.

Mutual Funds Get Guidance and Relief for Commodity Investments

by David Schwartz J.D. CPA | Monday, August 19, 2013 | All, Disclosure Regimes, Formal Regulatory Remedies

Given their strict regulatory regime, the use of commodities has long been a sticky subject for mutual funds. At the same time, however, the competitive environment for returns amongst mutual funds has made use of derivatives and commodity interests by registered investment companies much more common, with even funds that previously eschewed these instruments finding them useful and necessary.

August 2013 Financial Services Legislative Update

by David Schwartz J.D. CPA | Tuesday, August 13, 2013 | All, Change Overview and Rationale, Disclosure Regimes, Formal Regulatory Remedies

As they depart for the August recess, Congress has left some financial regulatory issues open to occupy their time upon their return next month. Bills addressing high frequency trading, exempting banks as municipal advisers, and relief for brokers engaging in private mergers and acquisition transactions remain open items for the new session. In addition, Congress is still waiting for answers from the SEC and CFTC regarding new cross-border derivatives regulations.

FASB Tries to Eliminate Shenanigans When Accounting for Repos

by David Schwartz J.D. CPA | Friday, April 19, 2013 | All, Disclosure Regimes, Formal Regulatory Remedies

On January 15, 2013, the Financial Accounting Standards Board (FASB) proposed changes to accounting standards for repos intended to improve financial reporting disclosures and more properly reflect a company’s obligations and risks. They also will clarify guidance for distinguishing between transactions that are essentially sales that can be moved off the balance sheet and on-balance sheet secured borrowings.

Can the Right Statistics Help Us Avoid the Next Titanic Disaster?

by David Schwartz J.D. CPA | Wednesday, April 17, 2013 | All, Change Overview and Rationale, Disclosure Regimes, Traditions

The latest financial crisis was marked by a spectacular lack of understanding about the astounding levels of risk that had been allowed to build up throughout the system. Regulators and risk managers realized after the fact that the data they needed to understand the scale, let alone the nuances, of what went wrong just had not been collected, or was obscured or insufficient. With the benefit of hindsight, and as we move into recovery, it is time to think about what role could new statistics play in heading off the next big market crisis. Claudio Borio of the Bank for International Settlements has put together an interesting treatise exploring the priorities we should be setting for new statistics and data sets that may very well help us avoid the next iceberg.

EC Crosses the Rubicon into Regulation of OTC Derivatives and Investment Advisers

by David Schwartz J.D. CPA | Tuesday, January 15, 2013 | All, Change Overview and Rationale, Disclosure Regimes, Formal Regulatory Remedies, Procedural Changes

On December 19, 2012, the European Commission adopted technical standards on the European Markets Infrastructure Regulation (EMIR) as well as a Delegated Regulation supplementing the Directive on Alternative Investment Fund Managers (AIFMD) (called “Level 2 measures”). These two measures have been under formulation and consideration since 2010, and the technical standards adopted on December 19 meet important preconditions to implementing EMIR and AIFMD throughout all EU member countries.

CFTC Finalizes Swaps “End-User” Exemption

by David Schwartz J.D. CPA | Sunday, July 15, 2012 | All, Disclosure Regimes, Formal Regulatory Remedies

On July 11, the CFTC approved its much awaited final rule implementing the end-user exception from mandatory clearing of swaps. The new ruleslay out parameters of the end-user exception by (1) defining the term “hedging or mitigating commercial risk” and (2) establishing certain reporting requirements for end-users electing to make use of the end-user exception. In addition, these new rules finalize the definition of “swaps” and trigger compliance requirements under several major CFTC swap market regulations.

Is the Evidence There to Revamp Reporting under 13(d)?

by David Schwartz J.D. CPA | Sunday, February 19, 2012 | All, Disclosure Regimes, Formal Regulatory Remedies

Lucian Bebchuk, Professor of Law, Economics, and Finance at Harvard Law School and Robert J. Jackson, Jr., Associate Professor of Law at Columbia Law School have published a paper urging caution and concluding that the SEC should not proceed with a recently proposed tightening of blockholder reporting. While not opposing some re-examination of the blockholder reporting regulatory regime, Bebchuk and Jackson explain that changes should be examined in the larger context of the beneficial role that outside blockholders play in American corporate governance and the broad set of rules that apply to such blockholders.

Model-Sensitive Disclosures Under Consideration

by David Schwartz J.D. CPA | Friday, October 28, 2011 | All, Change Overview and Rationale, Disclosure Regimes

In a forthcoming article in the Vanderbilt Law Review, Robert P Bartlett III, Assistant Professor of Law at the University of California, Berkeley, proposes a disclosure regime designed to enhance accurate pricing of a bank’s exposure to credit risk while at the same time safeguarding the confidentiality of a bank’s proprietary investment strategies and customer information. The article, Making Banks Transparent, begins from the premise that bank disclosures are notoriously lacking in granular, position-level information concerning their credit investments. Consequently, in times of market stress, investors must speculate as to which and to what extent banks maybe exposed, causing disruptions in credit markets and amplifying systemic risk. Bartlett proposes a mandatory disclosure regime based on credit modeling employing the very analytical tools banks themselves have developed and use to understand their own credit exposures.

Bank of England Examines Market Developments in Securities Lending

by David Schwartz J.D. CPA | Thursday, September 22, 2011 | All, Change Overview and Rationale, Disclosure Regimes

In their Quarterly Bulletin (Q3 2011), the Bank of England (BOE) examines the lessons the financial crisis revealed in the securities lending industry, as well as some of the more recent market driven and regulatory developments emerging to mitigate these risks. In particular, BOE voices a high level of concern over the risk of contagion arising from the interconnectedness between participants created by securities lending transactions, and the dangerous opacity of risks incurred across all participants prior to the financial crisis.

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Disclosure Regimes