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Formal Regulatory Remedies

IOSCO Issues Consultation Paper on Distribution of Complex Financial Products

by | Tuesday, March 20, 2012 | ,

Last week, the Technical Committee of the International Organization of Securities Commissions (IOSCO) issued a consultation paper on the distribution by intermediaries of complex financial products to retail and non-retail customers. The paper focuses on customer protections, proposing nine principles governing suitability and disclosure obligations, and will carry much weight as jurisdictions and IOSCO member regulators design or strengthen their regulatory regimes governing complex securities.

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EU Financial Transaction Tax Casts an Extremely Wide Net

by | Monday, March 19, 2012 | ,

On May 23, the European Parliament adopted a controversial financial transaction tax that would impose a 0.1% tax for shares and bonds and a 0.01% tax on derivatives. The language casts a very wide net and would require financial institutions located outside the EU to pay the tax if they traded securities originally issued within the EU, as well as taxing shares issued outside of the EU but subsequently traded by at least one institution established within the EU.

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Harvard’s Coates on Proposed Securities Law Reforms

by | Monday, March 19, 2012 | ,

John C. Coates IV, professor of law and economics at Harvard Law School, testified before the U.S. Senate Subcommittee on Securities, Insurance and Investment on December 14. In his testimony, Professor Coates took up three themes related to pending proposals to revise securities laws to (among other things) deregulate widely held but unlisted companies and banks, to permit unregistered “crowdfinancing,” and to loosen constraints on small public offerings:

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ESMA Issues Consultation Draft on Regulation of OTC Derivatives, CCPs and Trade Repositories

by | Monday, March 19, 2012 | , ,

The European Securities and Markets Authority has issued a discussion draft on proposed regulation of OTC Derivatives, CCPs and trade repositories. The draft introduces provisions to improve transparency and reduce the risks associated with the OTC derivatives market and establishes common rules for central counterparties and for trade repositories.

The discussion paper follows the structure of the European Market Infrastructure Regulation proposal (EMIR) published in 2010, with the first section focusing on OTC derivatives and in particular the clearing obligation, risk mitigation techniques for contracts not cleared by a CCP and exemptions to certain requirements.

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Just How Ready Are We for Swaps Reform?

by | Monday, March 19, 2012 | , ,

Just in time for the CFTC and SEC’s final swaps provisions, State Street and TABB Group have published a paper, Charting New Territory: Buy-Side Readiness for Swaps Reforms, based on a survey of buy-side firms examining where the investment community stands on a range of issues arising from global swaps reforms. The paper also looks at the challenges the industry faces as it transforms from an opaque, over-the-counter, bilaterally traded environment to electronic execution and central clearing.

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The Transparent Future of Swaps Markets

by | Monday, March 19, 2012 | ,

CFTC Chairman, Gary Gensler, says he believes that the days of the opaque swaps market are ending and a new era of transparency and commonsense rules of the road is on the horizon. Gensler’s October 10, 2012 address before the George Washington University Center for Law, Economics and Finance Conference provides some insights into how Mr. Gensler and his agency are paving the way for this new era. For starters, regulation of the swaps markets is now catching up to the great financial market reforms of the 1930s, such as public reporting of transactions, central exchange trading, and regulation of dealers. According to Gensler, these new Dodd-Frank regulations are implementing the same kinds of protections that have worked for decades in the securities and futures markets, bringing transparency to and lowering the risk of the swaps market. Mr. Gensler believes applying these time-tested tenants of risk management to swaps markets, and shining a bright light on its activities and players, is the best way to protect investors.

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Volker and Legislators Defend the Volker Rules

by | Sunday, February 26, 2012 | , ,

Responding to strident criticism of proposed regulations implementing the Volker Rule, former Fed Chair Paul Volker and the Senate authors of the Dodd-Frank Volker Rule provisions defended the rule as absolutely vital and urged the SEC and banking agencies to eliminate unjustified exclusions and exemptions, such as proposed hedging exemptions related to bank investments in private funds.

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SEC Chair Lays Out the Future of OTC Derivatives Regulation

by | Sunday, February 19, 2012 | ,

In an address in February before the Practicing Law Institute, SEC Chairman Mary Schapiro outlined for the audience the Commission’s plans to build, from the ground up, a new regulatory regime for over-the-counter derivatives. The innovative and heretofore lightly regulated OTC derivatives market has long been seen by Schapiro as a risk to the financial system. In particular, she sees systematic risks posed by: the opacity of the derivatives market; weak or non-existent capital, margin and clearing and settlement requirements; and the concentration of derivative transactions among a relatively small number of institutions.

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Beyond Basel. Can We Do Better than Basel III?

by | Sunday, February 19, 2012 | , ,

Even as countries strive to meet the quickly approaching Basel III deadlines, some fairly influential voices in regulatory policy are wondering aloud if the latest Basel guidelines are up to the task. Thomas M. Hoenig, director of the Federal Deposit Insurance Corporation, in a September 14, 2012 address before the American Banker Regulatory Symposium, raised his concerns that Basel III is based on faulty assumptions and processes, and introduces unworkable complications into an already complex system. Hoenig proposes an alternative, a “back to basics” approach he feels would be more easily monitored and enforced, and represent a better measure of a firm’s ability to withstand financial adversity.

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

by | Sunday, February 19, 2012 | , ,

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.

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