Financial Regulatory Forum

U.S. broker-dealers scrutinized for anti-laundering compliance in Venezuelan currency swaps

By Brett Wolf

NEW YORK, Nov. 13 (Thomson Reuters Accelus) - Securities industry regulators are beginning to ask U.S. broker-dealers tough questions about how they are mitigating money laundering and sanctions risks associated with their involvement in a 2-year-old currency exchange system run by the Venezuelan government, sources familiar with the issue said.

“There are a lot of questions being asked by regulators and compliance officers,” said Sven Stumbauer, managing director of Veris Consulting Inc’s Miami office. “And some broker-dealers, especially small introducing brokers, cannot answer them.” (more…)

Post-election SEC could emphasize enforcement over rule-writing, says former chair

By Emmanuel Olaoye

WASHINGTON/NEW YORK (Thomson Reuters Accelus) - With the U.S. Congress still politically divided after the elections that returned President Barack Obama to office, the U.S. Securities and Exchange Commission is likely to take an enforcement approach to supervision rather than look to change conduct by writing new rules, former commission chair Harvey Pitt said.

A divided Congress, he said, would struggle to check an SEC that turned to enforcement actions to implement policies it saw as in keeping with the Dodd-Frank Act.

“If you’ve got a split Congress, effectively it means that Congress’s principal weapon (against a regulator) will be holding hearings … That is a lot less of a potent weapon than the notions that if Congress doesn’t like what you do, they may pass a law that curtails your ability to do what you’ve been doing.”

States’ legalization of marijuana sales fails to address legal quandary for banks

By Brett Wolf

ST. LOUIS/NEW YORK (Thomson Reuters Accelus) - Although Colorado and Washington became the first states to legalize the recreational use and sale of marijuana with the passage of ballot measures on Tuesday, financial institutions across the country should continue to refuse to do business with marijuana businesses, anti-money laundering experts said.
“If financial institutions are federally licensed or insured, they must comply with federal regulations, and those regulations are clear about conducting financial transactions with money generated by the sale of narcotics,” said Jim Dowling, a former Internal Revenue Service special agent who also acted as an anti-money laundering advisor to the Office of National Drug Control Policy.  (more…)

Firms subject to U.S. FATCA advised to press on with preparing despite rule delay

By Emmanuel Olaoye

WASHINGTON/NEW YORK, Nov. 6 (Thomson Reuters Accelus) - Financial institutions should take advantage of the U.S. Internal Revenue Service’s decision to postpone key start dates in the Foreign Account Tax Compliance Act (FATCA) and not wait for the U.S. Treasury to issue its final rules before they start their preparations, experts told Compliance Complete.

“If you put off your efforts or suspend them for too long I think you’ll fall way too far behind. I think you’ll have a very difficult time doing what you have to do. At this point you should have a very clear idea of what your current systems and procedures can and can’t do and how they are going to have to be modified,” said John Staples, managing partner of the law firm Burt, Staples & Maner, LLP. (more…)

U.S. Treasury to move by year end on plan to exempt forex swaps, sources say

By Emmanuel Olaoye

WASHINGTON, Oct. 24 (Thomson Reuters Accelus) - The U.S. Treasury Department will move ahead after the Nov. 6 U.S. national elections to issue its plan for exempting foreign exchange swaps, a banking industry source said. A senior government official said a decision on the issue was expected by year end, after international standards setters complete work on derivatives margin requirements.

The Treasury plan, which was proposed in April 2011, would exempt instruments such as foreign exchange swaps and forward contracts from new rules affecting dealers in the $650 trillion over-the-counter derivatives market.  (more…)

Kill switches may be too difficult to implement despite new call by CFTC member, expert says

By Emmanuel Olaoye, Compliance Complete

WASHINGTON, Oct. 17 (Thomson Reuters Accelus) - CFTC Commissioner Bart Chilton has called for high frequency traders, or “cheetahs” to face so-called kill switches that would shut down a broker dealer’s trading over erroneous orders or technology glitches. But a trading expert said the measure may be too difficult to implement in practice.

The problem with kill switches lies with the timing of the decision to turn off electronic trading, said Bernard Donefer, a professor of Trading Technology and Risk management in financial markets at Baruch College and NYU Stern School of Business.  (more…)

U.S. self-regulatory bodies move toward cost-benefit analysis

By Nick Paraskeva, Compliance Complete contributing author

NEW YORK, Oct. 9 (Thomson Reuters Accelus) - The financial industry’s self-regulatory organizations (SROs) are being pressed to conduct more rigorous cost-benefit analyses of their rules, to the same standards as federal regulators. This follows recent court judgments overturning rules issued by the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC), in cases brought by the industry on grounds that the rules lacked such an analysis.

“Any rulemaking, whether by an SRO or by the SEC, should be the product of a careful and balanced assessment of the potential consequences that could arise,” said SEC Commissioner Daniel Gallagher at SIFMA’s Market Structure Conference last week. Gallagher advocated the change as part of a call for a fundamental review of the U.S. self-regulatory structure, which consists of both regulators and exchanges. (more…)

EXCLUSIVE: Credit derivatives market can expect specific rules, says regulator

By Rachel Wolcott, Compliance Complete

LONDON, Oct. 4 (Thomson Reuters Accelus) - Credit derivatives dealers can expect to see specific rules and regulations to address some of the peculiarities of that market, said Edouard Vieillefond, director in charge of regulation policy and international affairs at French regulator Autorité des marchés financiers (AMF). Despite the huge amount of regulation already aimed at the broader derivatives market, there is concern that it will be insufficient to cover continuing questions that regulators have about its functioning.

“The question is will the reform currently under finalisation or implementation, such as EMIR in Europe, be enough? Credit default swaps are derivatives on credit that look like insurance products. They are so specific they may deserve specific treatment and additional regulatory requirements or perhaps a better harmonisation of the prudential and the traditional market conduct regulation,” Vieillefond told Compliance Complete. (more…)

Mortgage lawsuit against JPMorgan offers refresher on basic compliance lessons

By Stuart Gittleman

NEW YORK, Oct. 3 (Thomson Reuters Accelus) - Securities issuers that claim to have conducted due diligence on their offerings should address and remediate problems found and not ignore red flags, as made clear by the New York state fraud lawsuit against JPMorgan over they way its Bear Stearns unit dealt in mortgage securities. (more…)

IA brief: State laws may require firms to re-think social media policies

By Jason Wallace

NEW YORK, Oct. 3 (Thomson Reuters Accelus) – Federal and state privacy legislation aiming to protect against employer access to private social media websites may put the investment industry in a bind — unable to fully supervise social-media and electronic communications used by their representatives.

Broker-dealers and investment advisory firms have been carefully embracing social media over the last few years. Firms have shaped policies and procedures with a balance between the needs and wants of their representatives while still making it possible to supervise and ensure compliance with regulatory regulations and guidance.

(more…)

  •