Financial Regulatory Forum

Killing dead flies with a sledgehammer: SEC proceedings against already defunct companies

By Morris Simkin, Thomson Reuters Accelus contributing author

NEW YORK, Dec. 22 (Thomson Reuters Accelus) – I was recently involved in a case brought by the Securities and Exchange Commission to revoke the registration of a company’s common stock. But the company’s publicly held common stock had been revoked by a bankruptcy court order issued some seven years before the SEC proceeding began.

This piqued my curiosity. Why was the SEC bringing this proceeding, and how many other similar cases had they brought? How much was this costing the public — both in terms of SEC staff time and other enforcement opportunities lost because the staff was pursuing these companies? And were there better ways to get the same result? (more…)

Fed’s capital proposal not as tough as feared, may give U.S. banks advantage

By Rachel Wolcott

NEW YORK/LONDON, Dec. 22 (Thomson Reuters Accelus) - Considering the cost of the financial crisis to the American taxpayer — anywhere between $700 billion and $12.8 trillion depending on who you talk to — the proposed capital rules the Federal Reserve published yesterday seem pretty lenient, compare to those mooted by some European countries.

However, it is a certainty that the same U.S. bank CEOs who have been so vociferous in their criticism of any increase in capital requirements, will continue their efforts to pare down the amount of capital they are required to hold. (more…)

MF Global trustee reviewing firm’s practice of repledging collateral

By Emmanuel Olaoye and Christopher Elias

NEW YORK/LONDON, Dec. 21 (Thomson Reuters Accelus) - The bankruptcy trustee for collapsed U.S. brokerage firm MF Global Inc. is looking into how the firm re-pledged customer collateral as part of its search for $1.2 billion of missing customer funds.

The practice, called re-hypothecation, has drawn renewed scrutiny after the failure of MF Global and experts said U.S. regulators may face new restrictions as part of efforts to increase protection on customer accounts. (more…)

U.S. financial services can expect more Dodd-Frank in 2012, not less

By Rachel Wolcott

NEW YORK, Dec.16 (Thomson Reuters Accelus) – When congressman Barney Frank announced he would not seek another term, enemies were quick to predict the demise of the wide-ranging financial reform act that the Massachusetts Democrat penned with former Connecticut Senator Chris Dodd. These pronouncements are not just premature, but according to regulatory experts, probably wrong. Unless there is a real seismic political shift to the right after the 2012 elections, they say, the Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 will survive, perhaps with a little tinkering, and firms had better be prepared to deal with it.

Dodd-Frank will only face a real threat if the Republicans take the White House and a majority in the U.S. Senate, while hanging on to the House of Representatives. Right now, with former House Speaker Newt Gingrich the latest to surge to the top of the Republican pack of presidential candidates, the likely outcome of November presidential elections is far from clear. If President Barack Obama, who signed Dodd Frank into law, stays in office, he can use his veto power to try to protect Dodd-Frank. (more…)

Regulatory round-up — U.S. rules to know in 2012

By Nick Paraskeva

NEW YORK, Dec. 16 (Thomson Reuters Accelus) – Several recently adopted rules in the U.S. are going into effect for specific types of firms in 2012. These rules include ones released by the Securities and Exchange Commission, Commodity Futures Trading Commission and Federal Reserve, issued to implement the Dodd-Frank Act and as a response to market developments.

The SEC-adopted rules requiring reporting by advisers to hedge funds and by large traders of securities are explained below. We also cover the CFTC final rules on derivative clearing firms in the swaps market and provide a summary of the Fed’s final rules on living wills for large banks, and non-bank systemically important financial institutions (SIFIs), under the Dodd-Frank Act. (more…)

FATCA tax law has bigger impact on foreign than U.S. firms

US dollar note and other currenciesBy Nick Paraskeva

NEW YORK, (Thomson Reuters Accelus) - The soon-to-be-implemented U.S. Foreign Account Tax Compliance Act, or FATCA, will have a bigger impact on foreign financial institutions than on U.S. ones, financial industry participants were told at a panel discussion on the law, which is placing new duties on compliance officers.

The event was hosted by the Securities Industry and Financial Markets Association (SIFMA) and conducted by the group’s Operations & Technology Society’s–Securities Operations Section, reflecting the role that staff in the operations units of firms were expected to have in meeting FATCA provisions.  (more…)

Cost-benefit lawsuits snarl Dodd-Frank implementation

By Nick Paraskeva

NEW YORK/WASHINGTON, (Thomson Reuters Accelus) – A financial industry lawsuit seeking to block new U.S. rules on commodity position limits on the grounds that they lack an adequate cost-benefit analysis could cause regulators to slow their implementation of the Dodd-Frank financial regulatory overhaul and be an indicator of more such challenges. Meanwhile, the Obama administration is saying it will resist efforts to block the law.  (more…)

U.S. ‘microcap’ charges highlight debate over small-firm capital raising

By Stuart Gittleman

NEW YORK, Dec. 6 (Thomson Reuters Accelus) – Federal charges filed last week in a suspected kickback scheme to sell thinly traded stocks highlight concerns over investor safety as Congress making it easier for small business to raise capital. Boston federal prosecutors filed fraud and conspiracy charges last Thursday against 13 people: corporate officers, a lawyer and stock promoter. They were accused of a kickback scheme in which payments hidden by phony consulting contracts were made to an undercover FBI agent, who posed as a hedge-fund representative, in exchange for having the fund buy stock in certain small companies. (more…)

On the other hand: When Woodstock meets Wall Street

By Scott McCleskey

Nov. 29 (Thomson Reuters Accelus) - If you didn’t know any different, you’d think the Occupy Wall Street movement was the kind of military operation so often criticized by people of a certain political temperament. It started off with a clear mission (financial reform), then suffered from mission creep (economic justice) and it never had an exit strategy. I think there was a surge in there somewhere as well but it’s hard to tell when they all live in tents.

The shame is that they had a point, in the beginning. Reforming the financial system is a gravely serious priority that is losing momentum. But by opening its arms to all who feel oppressed, repressed or suppressed, the inevitable result of the Occupy movement was that the original issue was lost in the noise. And as the movement begins to wind down it is likely to miss its greatest opportunity – to become the Tea Party of the Left.

Love ‘em or hate ‘em, the Tea Party has been successful in grabbing the microphone and framing much of the conservative agenda. It may represent only a minority of Republican voters, but it will undoubtedly influence the outcome of the party’s nomination process and its 2012 platform. It does so by focusing on a few core issues, and has accomplished all this without an organized structure or dominant leader.

Taking on trading desk risk: the lessons of UBS and MF Global

Traders work at their desks in front of the DAX indexBy Rachel Wolcott

LONDON/NEW YORK, Nov. 22 (Thomson Reuters Accelus) – When the young UBS trader Kweku Adoboli turned himself in after allegedly having lost $2.3 billion on the Swiss bank’s delta one desk, many asked how such a huge loss could have happened without anyone knowing. The short answer was, in part, that Adoboli’s back-office experience gave him inside knowledge which permitted him to game UBS’ control systems and hide the fraud. The same excuse was trotted out to explain Jérôme Kerviel’s $6.8 billion loss at Société Générale in 2008, but it must surely take more than a stint in the bank office to fool banks’ risk controls systems.

Giorgio Questa, visiting professor in the faculty of finance at Cass Business School in London, said: “Banks have not understood that they will have accidents if they don’t come to terms with risk controls. It’s a question of incompetence. It’s completely clear [in the UBS case] that people weren’t doing their jobs.” (more…)

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