Reuters blog archive
from The Great Debate UK:
--Gregg Beechey is a Partner in the Financial Institutions Group at law firm King and Wood Mallesons SJ Berwin. The opinions expressed are his own.--
One of the great disappointments in the raft of regulatory changes coming out of the financial crisis of 2008 has been the failure of regulators to work together to agree a common framework and, perhaps, the lack of a greater role for the International Organisation of Securities Commissions (IOSCO). There seems to be a significant disconnect between the rate at which political agreement has turned into regulatory reality in Europe, the U.S. and other parts of the world.
In Europe, we face a tidal wave of new regulation, including:
the Alternative Investment Fund Managers Directive for fund managers
the European Markets Infrastructure Regulations taking OTC derivative trades into the world of central clearing and layering on new compliance requirements
CRD IV implementing Basel 3 in relation to bank capital
Solvency II, bringing new capital requirements for insurers
the European Commission’s proposals to regulate shadow banking – in particular, certain money market funds.
This is matched to some extent with the activity in the U.S. under the banner of Dodd-Frank, with changes to the regulation of investment advisers by the SEC, derivatives trading by the CFTC, regulation of banks and implementation of Basel 3 and similar discussions on shadow banking.
Asian political leaders have signed up to the same agreements as those in the U.S. and Europe, but there seems to be far less local enthusiasm or urgency to turn these into concrete proposals. Although Asian financial institutions and structures have become more sophisticated in recent years, there remains significant variation in the degree to which Asia’s domestic capital markets have matured and integrated with others in the region. These markets remain more integrated with global financial markets than with other local financial markets and problems of regional financing and funding and fragmentation across capital markets still exist.
from Ian Bremmer:
What will the White House screw up next? Democrats have watched as one calamity after another has befallen what was once the most promising Democratic administration since John F. Kennedy’s. Obamacare, the NSA, Syria, heck, even the administration’s campaign foibles are back in the news with the publication of the new tell-all book Double Down.
Yet all is not lost. The Obama administration has not exactly bungled its way through five years of power. Until this year, in fact, Republicans were complaining that the press had been too kind towards Obama. With all the dour news, it is worthwhile to take stock of all the good things for which Obama can take credit. Bear in mind, some of these successes may not have been Obama’s ideal objective -- but the end results are victories regardless. These are the top eight achievements that not even Edward Snowden can take away, in descending order of importance.
Already the long reach of Dodd-Frank into muniland is having an effect. Al.com tells the story (emphasis mine):
The Wall Street investment bank leading Jefferson County's pitch to exit Chapter 9 municipal bankruptcy could be violating securities law if it serves as an underwriter in the deal, a lawsuit brought by Jefferson County sewer ratepayers says.
from The Great Debate:
A lot can happen in a year. This time last year, U.S. businesses and NGOs bemoaned the Obama administration's perceived indifference to Africa. Now, they’re trying to find out how to catch the wave of interest. Major new initiatives, including Power Africa and Trade Africa, unveiled during President Obama’s first true trip to Africa this summer, as well as a reinvigorated push to renew the African Growth and Opportunity Act fully two years before it's due to expire, have given U.S.-Africa watchers a lot to consider. But what -- and when -- is enough for U.S. policy in Africa? What more can be done in the year ahead? How do things really shake out for investors, civil society and Africans? Here are three additional areas the Administration should consider as it deepens its commitment to the continent:
1. Invest in Africa’s equity and commodity markets. Despite all the interest in Africa’s economic growth and investment potential, it’s still very hard to invest on the continent. Of its less than 30 stock markets, only a few exchanges really offer modern processes and back-end technology to facilitate daily transactions. As Todd Moss from the Center for Global Development notes in a recent paper, some African exchanges trade less in a whole year than New York does before “their first coffee break.” As a result, for institutional investors who need to take large positions or who have fiduciary requirements for daily liquidity, Africa remains almost entirely off-limits. In an era of algorithmic and high-speed trading, Africa’s antique market infrastructure is a major barrier to entry for much needed foreign direct investment.
from Alison Frankel:
In the first full year of operation for the Securities and Exchange Commission's Dodd-Frank whistle-blower program, the agency received 324 tips from whistle-blowers working outside of the United States - almost 11 percent of all the whistle-blower reports received by the SEC. If those tips eventually result in sanctions of more than $1 million, the SEC whistle-blowers will be in line for bounties. But if they're fired by their companies for disclosing corporate wrongdoing, they may not be able to sue under Dodd-Frank because the law's anti-retaliation protection for whistle-blowers does not specify that it extends overseas. And as you know, the U.S. Supreme Court's 2010 ruling in Morrison v. National Australia Bank holds that civil laws should be presumed not to apply overseas unless they say otherwise.
Morrison's application to Dodd-Frank's whistle-blower protection is playing out right now in federal court in Manhattan, in a retaliation suit brought by a Taiwanese compliance officer for a Chinese subsidiary of Siemens. (The Wall Street Journal was the first to report on the case.) Meng-Lin Liu and his lawyer at Kaiser Saurborn & Mair allege that after Liu reported his suspicions to Siemens' CFO for Healthcare in China, claiming that the company was violating the Foreign Corrupt Practices Act by engaging in a kickback scheme involving the sale to public hospitals of medical imaging equipment, he was dismissed from his job. In January 2013, Liu sued Siemens under Dodd-Frank for double his back pay.
from Alison Frankel:
If Khaled Asadi, a former GE Energy executive who lost his job after alerting his boss to concerns that GE might have run afoul of the Foreign Corrupt Practices Act, had sued his old employer in New York or Connecticut, things might have worked out differently for him. Several federal trial judges in those jurisdictions have ruled that whistle-blowers who report corporate wrongdoing internally are protected by the Dodd-Frank Act of 2010, even though the statute defines whistle-blowers as employees who report securities violations to the Securities and Exchange Commission. But Asadi, who worked in GE Energy's office in Amman, Jordan, filed a claim that the company had illegally retaliated against him in federal district court in Houston. And on Wednesday, the 5th Circuit Court of Appeals - with hardly a nod to contrary lower-court decisions in other circuits - ruled that Asadi is not a whistle-blower under Dodd-Frank because he talked to his boss and not the SEC.
The 5th Circuit opinion, written by Judge Jennifer Elrod for a panel that also included Judge Stephen Higginson and U.S. District Judge Brian Jackson (sitting by designation), highlights the tension between whistle-blower provisions in Dodd-Frank and the Sarbanes-Oxley Act of 2002. SOX, as you recall, directs employees to report possible wrongdoing up the corporate chain of command. SOX whistle-blowers must exhaust administrative remedies before they can sue and may only recover back pay. Dodd-Frank, on the other hand, directs whistle-blowers to bring their concerns to the SEC and permits them to sue for double the pay they lost through corporate retaliation. You can see why employees would rather bring claims under Dodd-Frank than SOX: They can get to court without clearing as many procedural obstacles and can recover twice as much money. You can also see why defendants argue that employees who went to their bosses instead of reporting to the SEC don't qualify as Dodd-Frank whistle-blowers.
Post corrected to show Brooksley Born is a former head of the Commodity Futures Trading Commission (CFTC) not a former Fed board governor.
Underlying the Federal Reserve recent announcement on new capital rules was a general sense of “mission accomplished.” The U.S. central bank, also a key financial regulator, has finally implemented requirements that it says could help prevent a repeat of the 2008 banking meltdown by forcing Wall Street firms to rely less heavily on debt, thereby making them less vulnerable during times of stress.
from The Great Debate:
The 2008 financial crisis demonstrated how interconnected the global financial system is. What began as a real estate bubble fueled by subprime mortgages in many states ballooned into a global financial panic of unprecedented magnitude. Bundles of poorly underwritten mortgages generated toxic derivatives bet on in a global market. When the dust settled, there was broad agreement that not only did we need a new financial regulatory regime, it had to be globally coordinated.
The United States, the European Union, Britain, Japan and other nations should come up with a regulatory regime that works across all borders. This does not have to be the exact same set of rules and regulations, but rather compatible systems, based on a common set of definitions and structures.
from Stories I’d like to see:
I’m a news junkie. But I am completely clueless about one policy issue that is hugely important (it affects what we eat and how much we pay for it), involves hundreds of billions of dollars in government programs and subsidies, and was splashed all over the front pages last week as the latest example of congressional dysfunction.
I’m referring, of course, to America’s farm policy (that’s farm, not foreign) and what last week’s headlines called “the farm bill.”
It's one of those touchy subjects that Federal Reserve officials don't really want to talk about, thank you very much.
For nearly three years now, no one has been tapped to serve as the U.S. central bank's Vice Chairman for Supervision. According to the landmark 2010 Dodd-Frank bill, which created the position to show that the Fed means business as it cracks down on Wall Street, President Obama was to appoint a Vice Chair to spearhead bank oversight and to regularly answer to Congress as Chairman Ben Bernanke's right hand man.