Formal Regulatory Remedies - Center for the Study of Financial Market Evolution (CSFME)

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.

Latest FSB Global SIFI Consultation Draws Swift Criticism

by David Schwartz J.D. CPA | Saturday, December 19, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

Though the Financial Stability Board’s (FSB) March 4, 2015 consultation paper on Global SIFI designation is only a week old, it has already generated a chorus of criticism and condemnation from some of the asset management industry’s most powerful players. This second public consultation proposes revised methodologies for identifying non-bank non-insurer global systemically important financial institutions (NBNI G-SIFIs) based on comments received on the first consultative paper published in January 2014.

CSMFE Submits Comments on FSB Data Collection Proposals

by David Schwartz J.D. CPA | Saturday, December 19, 2015 | All, Change Overview and Rationale, Disclosure Regimes, Formal Regulatory Remedies, ROSE

On February 12, 2015, the Center for the Study of Financial Market Evolution (“CSFME” or the “Center”) filed its response to the Financial Stability Board’s (FSB) consultation, Standards and Processes for Global Securities Financing Data Collection and Aggregation (“Consultation Paper”). The Consultation Paper proposes a system of data collection intended to help market supervisors infer changes in systemic risk that are said to be created by securities lenders, repo traders and margin lenders. Previously, as part of their larger workstream on shadow banking, the FSB recommended that national/regional authorities collect appropriate data on securities financing markets to help the FSB better assess ongoing financial stability. The Consultation Paper is a proposal regarding what kinds of data on repo, securities lending, and margin lending should be collected, how they should be collected, and in what format.

SEC Proposes Derivatives Regime for Mutual Funds, ETFs, and BDCs

by David Schwartz J.D. CPA | Monday, December 14, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

On Friday, December 11, as previously announced, the SEC voted to propose a new rule regarding the use of derivatives by mutual funds, closed-end funds, ETFs, and business development companies. Since as far back as the 1990s under Chairman Aurthur Levitt, the SEC has been concerned about the multitude of risks derivatives can raise for funds, including risks related to leverage and liquidity. But, with the dramatic growth in the volume and complexity of the derivatives markets over the past two decades and the increased use of derivatives by certain funds, the risks to funds and the associated investor protection concerns are now significantly greater.

More Changes to Come for Repo Markets

by David Schwartz J.D. CPA | Sunday, December 13, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

Reforms following the financial crisis have made ti-party repo far safer, finds a report published by BNY Mellon and PWC, but even greater changes lie in store. Based on a survey of market participants, the report found that the repo markets remain in a period of dramatic transition. While concluding that regulation and ongoing reform will continue to have a major effect on wholesale funding, the report also predicts that market forces and changes in the structure and profitability of the business will have major effects on repo volumes and economics over the next few years.

Fed Remains Concerned About Firesale Risks

by David Schwartz J.D. CPA | Thursday, November 19, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

In a January 30, 2015 address, Federal Reserve Board Governor Daniel K. Tarullo once again voiced the Fed’s concerns about the systemic risk posed by potential firesales in the asset management industry. Tarullo indicated that as regulators implement reforms under the Basel and FSB proposals and frameworks, they should take into account the “system-wide demands on liquidity during stress periods and correlated risks among asset managers that could exacerbate liquidity, redemption and fire-sale pressures.”

U.S. Leads the Way in Money Market Reform

by David Schwartz J.D. CPA | Thursday, November 19, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

In a report published earlier this week, the Board of the International Organization of Securities Commissions (IOSCO) found that, among the major jurisdictions in the money market fund (MMF) industry, the United States has made the most progress in regulatory reforms. Using the most current data available, IOSCO determined that the global MMF market is dominated by five jurisdictions: the U.S., France, Luxembourg, Ireland and China. Together, these five jurisdictions account for just under 90% of global assets under management in MMFs.

FSOC Focused on Asset Management and Reaching a Broader Audience

by David Schwartz J.D. CPA | Monday, November 16, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

During their most recent meeting, the Financial Stability Oversight Council revealed that the asset management sector remains an area of concern to the super-regulator. According to minutes of the November 2, 2015 meeting, the FSOC has identified six categories of potential risk arising from the asset management sector and is conducting ongoing analyses with an eye toward more regulation.

FINRA Will Repeat Liquidity Stress Tests in 2016

by David Schwartz J.D. CPA | Monday, October 19, 2015 | All, Change Overview and Rationale, Formal Regulatory Remedies

In a preview of FINRA’s 2016 letter on regulatory priorities and emerging risks, FINRA’s CEO, Richard Ketchum said that FINRA’s exam focus in the upcoming year will be on three key issues: outsourcing, cyber risk and liquidity concerns. Ketcham also said that FINRA will repeat “some version” of its liquidity stress tests in 2016, further indicating that these stress tests will be an ongoing focus of FINRA.

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Formal Regulatory Remedies