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

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.

How Do Mutual Funds Really Use Proxy Advisers?

by David Schwartz J.D. CPA | Tuesday, June 19, 2012 | All, Procedural Changes

A study published this month (June 2012) by the Investor Responsibility Research Center (IRRC) Institute and conducted by Tapestry Networks takes a look at the decision-making process for proxy voting used by 19 North American asset management firms. In particular, the study looks at how these leading US mutual funds develop proxy voting guidelines and reach decisions regarding how to vote. The 19 asset management firms used in the study account for over $15.4 trillion in assets under management, or more than half of the mutual fund assets under management in the United States.

OTC Derivatives Reform: A ‘Sea of Change’?

by David Schwartz J.D. CPA | Tuesday, June 19, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies, Procedural Changes

OTC derivatives legislation and clearing reforms understandably have European and US market participants scratching their heads about what this “sea of change” has in store for them and the future of OTC markets. David Felsenthal, a partner at Clifford Chance LLP, has given the matter some serious thought, and provides some guidance in his January 14, 2012 post at Harvard Law School’s Forum on Corporate Governance and Financial Regulation.

According to Felsenthal, the reforms being considered focus primarily on transparency about on positions and exposures of individual firms in OTC derivatives, a transparency sorely missing during the financial crisis.

Breaking the Law of Unintended Consequences

by David Schwartz J.D. CPA | Saturday, May 19, 2012 | All, Formal Regulatory Remedies, Procedural Changes

The rush to reregulate the financial markets after the financial crisis understandably has many concerned about unintended consequences. Regardless of good intentions, the fixes put in place by legislators, central bankers, and regulators no matter how well thought out are bound to affect the complex and constantly evolving global financial markets in unanticipated ways. Professor Roberta Romano of the Yale Law School shares these worries and proposes in her latest paper, Regulating in the Dark, a mechanism for addressing and remediating the inevitable unintended consequences of hasty financial regulation.

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

by David Schwartz J.D. CPA | Monday, March 19, 2012 | All, Formal Regulatory Remedies, Procedural Changes

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.

Federal Reserve Proposes Enhanced Prudential Standards and Early Remediation Requirements

by David Schwartz J.D. CPA | Monday, January 16, 2012 | All, Change Overview and Rationale, Formal Regulatory Remedies, Procedural Changes

On December 20, 2011, the Federal Reserve Board of Directors published its long awaited proposal on enhanced prudential standards and early remediation requirements. This proposal, required by the Dodd-Frank Act, would impose greater levels of regulation and supervision on:

First FRB Financial Stability Analysis Serves as a Model for the Industry

by David Schwartz J.D. CPA | Sunday, January 15, 2012 | All, Formal Regulatory Remedies, Procedural Changes

In a December 23, 2011 approval order in connection with the proposed acquisition of RBC Bank (USA), a North Carolina based unit of Royal Bank of Canada, by The PNC Financial Services Group, Inc. includes the FRB’s first ever Dodd-Frank financial stability analysis. This analysis may serve as a model for how the FRB will determine going forward “the extent to which a proposed acquisition, merger, or consolidation would result in greater or more concentrated risks to the stability of the United States banking or financial system” now required under Dodd-Frank.

Section 3 of the Bank Holding Company Act, as amended by Dodd-Frank, prohibits the FRB from approving a merger, acquisition, or consolidation proposal that would result in a monopoly or would be in furtherance of any attempt to monopolize the business of banking in any relevant banking market.

Basel Committee Issues New Core Principles for Effective Banking Supervision

by David Schwartz J.D. CPA | Monday, December 26, 2011 | All, Formal Regulatory Remedies, Procedural Changes

The Basel Committee on Banking Supervision has issued for consultation its revised Core Principles for Effective Banking Supervision. The consultative paper updates the Committee’s 2006 Core Principles document as well as the associated Core Principles Methodology, merging the two into a single comprehensive document. The revised set of twenty-nine Core Principles have also been reorganized to foster their implementation through a more logical structure, highlighting the difference between what supervisors do themselves and what they expect banks to do.

ISS Issues Whitepaper on Pay for Performance Methodology

by David Schwartz J.D. CPA | Tuesday, December 20, 2011 | All, Procedural Changes

On December 20, ISS published its white paper laying out in detail the pay for performance methodology it will implement under its 2012 policy updates. The goal of the white paper is to help both institutional clients and the companies in which they invest more fully understand ISS’ pay-for-performance methodology in advance of the 2012 proxy season.

Schapiro: SEC to Focus on Proxy Advisory Firms and Beneficial Ownership Rules

by David Schwartz J.D. CPA | Monday, December 19, 2011 | All, Formal Regulatory Remedies, Procedural Changes

In her December 15, 2011 address before the Transatlantic Corporate Governance Dialogue, SEC Chairman, Mary L. Schapiro, stated that in response to comments received on the Commission’s Proxy Plumbing concept release, the Commission is seriously considering providing guidance on how the federal securities laws should regulate the activities of proxy advisory firms. According to Schapiro, commenters on the concept release suggested that proxy advisory firms may interfere with, rather than enhance, the communication at the heart of effective engagement. The comments also reflect a level of frustration with the influence these firms have, accompanied by worries that they may not be accountable for, or even concerned with, the quality of the information on which they make voting recommendations.

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Procedural Changes