News
Selling Transparency: A Bean Counter’s Blog
A new disclosure data model has just been proposed by the SEC for U.S. securities lenders. Adoption of the model, called 10c-1 after the revised regulation, would be “one of the most drastic adjustments in the history of the securities lending industry,” writes Sidley Austin, a leading Wall Street law firm and advisor to broker-dealers. Previously, we have explained the proposal and intended benefits. Now we begin to analyze the proposed 10c-1 disclosure system’s value proposition. Will disclosure help more than it will cost to create and manage the network that supports the new disclosure system?
Who Bears the Cost of the SEC’s Securities Lending Disclosure Proposal?
The Securities and Exchange Commission (SEC) recently proposed a new reporting regime to increase transparency and efficiency in the securities-lending market. The SEC seeks to accomplish this by requiring anyone who loans a security on behalf of himself or another person to report material terms of those loans (and related information regarding the securities on loan) to a registered national securities association (RNSA), namely the Financial Industry Regulatory Authority (FINRA).
U.S. Stock Loan “Ticker”: A Gift to Beneficial Owners?
SEC’s New Disclosure Regime to Fix “Information Assymetry” Make no mistake. The new 10c-1 disclosure proposal by the SEC is an Investor Protection Rule on steroids. It is also a profound escalation of regulatory support for Investor Self-Protection. Nothing less than a near real-time, stock loan ticker will result if enacted, revealing U.S. loan rates […]
SEC Proposes Sweeping Securities Lending Disclosure Rules
Bringing Securities Lending Out of the Dark. On November 18, 2021, the Securities and Exchange Commission (SEC) proposed broad disclosure rules intended to “provide transparency in the securities lending market.” As directed by the Dodd-Frank Act[1], the Commission proposed these rules to: Further, the data elements proposed to be collected are intended to provide regulators […]
New Trends in Data Ownership
Certain challenges in securities finance can only be met with better data and newer data models. Market regulators now coping with investor demands for ESG-compliance will have to monitor the disclosures of regulated entities by combing through vast pools of stock loan and proxy voting data. Bank custodians and brokers, if tasked with validating the social propriety of their stock loans, will have to dive deep into customer profile data, deeper than either regulators or vendors can today access efficiently.
Assembling the Market Posse
We’ve all been there, having drinks after work with an important client visiting from overseas. My most memorable time was at the very beginning of my career on Wall Street. The client was a trader from the South African branch of Jos. Sebag & Co., a London firm more than 100 years old when he and I met in 1975 at the upscale bar, Michael II. The firm and the restaurant have long since vanished, but at the time Sebag was the most active account for First National City Bank’s (FNCB) American Depositary Receipt (ADR) business. The firm was far more active than Merrill Lynch, Goldman Sachs, or any other cross-border trading outfit. Most of the trades were for the issuance of ADRs in South African mining stocks, such as Anglo-American Gold.
DOL to Reverse Rules “Chilling” ESG Investing and Proxy Voting
The U.S. Labor Department (DOL) has proposed regulations that would greatly expand how retirement and pension plans can invest in ESG strategies and clarify the scope of ERISA plans’ responsibility for proxy voting. If adopted, the DOL’s proposal, drafted by the Employee Benefits Security Administration (EBSA), will reverse the former administration’s regulations on ESG factors in retirement portfolios and ERISA fiduciaries’ use of proxy voting powers in favor of social or political goals.
SEC Expands Investment Company Proxy Disclosures
The Securities and Exchange Commission issued a proposal to expand investment company disclosures of their proxy voting activities. If adopted, the rules would enhance the information mutual funds, exchange-traded funds, and other regulated investment companies are required to report on Form N-PX under the Investment Company Act.[1] These expanded disclosures are intended to make proxy voting decisions made by investment company advisers more complete, accessible, and understandable to investors.
Reddit Trading and Resilience in U.S. Equity Finance Part 4
Paris, September 24, 2021 – The next shoe has fallen in reaction to the January 2021 GameStop short squeeze, by which certain online brokers interpreted clearinghouse rules to necessitate the suspension of their retail customers’ ability to buy “meme stocks”. Today, the European Securities Markets Authority (ESMA), citing SEC and EU data for January 2021 on suspiciously high levels of failed meme stock settlements, asked for public comment on rule changes to avoid future short squeezes in the EU. This ESMA consultation on systemic risk management will surely propel industry leaders to advance their previously-announced plans for a block-chained securities market infrastructure to add even more robust operating and disclosure protocols.
Exposing the Rogue Traders
Master Criminals don’t usually confess in public. If prosecutors’ charges are true, Sanjay Shah is the leading figure in the largest reported tax swindle in history. Yet, Mr. Shah, unbowed, pleading his case to reporters, has openly admitted to borrowing the assets of widows and orphans in one country to kick-start a pyramid scheme of dividend capture trades, so as to swindle widows and orphans in other countries.