News
Supreme Court Rules ERISA Fiduciaries have Continuing Duty to Monitor
In a unanimous opinion issued on May 18, 2015, the Supreme Court confirmed a continuing duty of ERISA trustees to monitor investments. Although the case involved a complicated procedural history before arriving at the Supreme Court, the lawsuit presented a fairly simple question: is it sufficient for the ERISA duty of prudence that the fiduciary make prudent decisions to invest in the first instance, or must the fiduciary also make prudent ongoing decisions about whether it should change the composition of the plan’s portfolio or otherwise sell assets?
BIS Takes a Look Back at 2014
On December 7, 2014, the Bank for International Settlements (BIS) issued its latest quarterly review. Looking back at the year, and the quarter in particular, BIS sees signs of a buoyant global economy, however tempered by indications of some fragility.
BIS Progress Report on Basel Framework Implementation
At the end of April, the Bank for International Settlements (BIS) issued its eighth progress report on the adoption of the Basel regulatory framework. This report provides a high-level overview of the progress made by Basel Committee member states in adopting the Basel II, Basel 2.5, and Basel III framework as of the end of March 2015.
Office of Financial Research Seeks Better Securities Lending and Repo Data
Prior to the financial crisis, regulators only had limited data available to them about securities lending and repo markets. The crisis exposed a number of vulnerabilities previously not recognized as a result of this lack of data. Right away, regulators realized that the only way to understand and effectively address these weaknesses — leverage and liquidity risks, weak market infrastructure, and fire sale risks — was to obtain more and better regulatory data about securities lending and repo volume, the types and quality of collateral being employed, and how securities lending and repo fit into firms’ risk management processes. But a recent release by the Office of Financial Research says these data collection efforts are not enough. According to the OFR, despite the efforts of regulators, significant gaps remain, and “the risk of set fire sales before or after a counterpart default remains largely unaddressed.”
Basel Tightens the Reins on Internal Risk Modeling by Banks
In a November 2, 2015 speech in Madrid, Stefan Ingves, Chairman of the Basel Committee and Governor of Sveriges Riksbank, announced that the Basel Committee on Banking Supervision will revisit internal risk modeling by banks. According to Mr. Ingves, “ample evidence has accumulated to suggest that the current role of internal models in the regulatory framework does not strike the right balance between simplicity, comparability and risk sensitivity.” While “the use of internally modelled approaches was a defining feature of Basel II,” the Basel Committee expects to revisit this reliance on internal modeling and, perhaps, broadly eliminate it for some risk categories.
JP Morgan is First to Settle Forex Anti-trust Suit
JPMorgan Chase & Co has agreed to pay $100 million to settle a U.S. antitrust lawsuit in which investors accused it and 11 other major banks of rigging prices in the $5 trillion-per-day foreign exchange market. Investors sued the 12 banks alleging that traders at each conspired to rig foreign currency exchange transactions to boost profit at the expense of bank customers and investors.
A Revised Fiduciary Standard Proposal from the DOL
The Department of Labor has issued its long awaited reproposal of fiduciary standards for advisors of ERISA retirement plans. These new rules propose to expand the scope of the the definition of fiduciary under ERISA in order to capture more of the current services of 401(k) and IRA providers.
Congressional Republicans Want Answers on DOL and SEC Fiduciary Standards
In a March 4, 2015 letter, two House Republicans requested answers from Department of Labor (DOL) Secretary Thomas E. Perez about the process for devising new fiduciary rules for investment professionals providing services to retirement plans. Representative John Kline (R-MN), Chairman of the House Committee on Education and the Workforce, and Rep. Phil Roe (R-TN), Chairman of the Subcommittee on Health, Employment, Labor and Pensions, want to know if and how the DOL and the Securities and Exchange Commission (SEC) are working together to minimize potential conflicts, higher costs, and detrimental effects on information available to those saving for retirement.
Revised Fiduciary Standards Slowed but Not Stopped
Pursuant to a mandate in the Dodd-Frank act, both the Department of Labor and the Securities and Exchange Commission have been working to develop uniform fiduciary standards for investment advisers and broker-dealers. The efforts of the DOL and SEC have unfolded over the past five years with both floating proposals that have been met with stiff opposition from industry and in Congress. Each effort has hit its own respective roadblocks over the past year. However, despite eleventh-hour efforts by members of the investment industry and some on Capitol Hill, both the DOL and SEC appear to be moving ahead with their respective uniform fiduciary standards.
2015 ROSE Students File Comment Letters with the FSB
The focus of the Winter 2015 ROSE Program was global securities financing data collection and aggregation. This year, Five teams of Fordham University graduate and undergraduate students researched and drafted comment responses to the Financial Stability Board’s (“FSB”) November 2014 consultative document, Standards and Processes for Global Securities Financing Data Collection and Aggregation. The judges reviewed each excellent submission and selected one letter to be published on Fordham letterhead and submitted to the FSB. (Each of the teams submitted their comment letter to the FSB; however, only one received Fordham Unversity’s imprimatur.