Financial Regulatory Forum

IA brief: SEC examiners give first look at hedge fund exam findings

By Jason Wallace, Compliance Complete

NEW YORK, Feb. 11 (Thomson Reuters Accelus) - Last week, representatives of the Securities and Exchange Commission gave the first of many reports concerning its “presence exam” initiative for conducting initial regulatory exams of private advisers, and reported a lower rate of deficiencies compared with regular exams. The panel highlighted exam findings and staff observations concerning investment conflicts, marketing, valuation and custody.

The Dodd-Frank Act required approximately 1,500 private advisers to register with the SEC in 2012 – resulting in a current population of approximately 4,000 registered private advisers. (more…)

Financial Regulation in 2014: The Dust Hasn’t Settled For Compliance

By Compliance Complete, Thomson Reuters Accelus staff

The year 2013 saw a raft of new legislation stemming from regulators worldwide and 2014 looked like the year in which the dust would settle and that compliance professionals could spend focusing on implementing those changes. However, this has not been the case and compliance staff are still operating in a changing environment, where political pressures and cultural inertia mean that it is hard to pause for breath.

This year will still be one of implementation in a world that in some respects has not changed over the past seven years. A number of serious challenges will have to be tackled in 2014. They range from the international reach of the U.S. Foreign Account Tax Compliance Act, the Volcker rule and cross-border derivatives regulations, to the minute complexities of the European Market Infrastructure Regulation.

Read this in-depth special report from Thomson Reuters that looks at an array of regulatory initiatives and their impact on the current global economy and political world. Gain a better understanding of what 2014 will bring to market participants and how businesses should prepare to face the regulatory changes.

Small banks await regulatory fix on Trust Preferred Securities portion of the Volcker rule for capital decisions

By Bora Yagiz, Compliance Complete

NEW YORK, Jan. 24 (Thomson Reuters Accelus) - Banks that have relied over the years on a special type of assets to fulfill their capital requirements may soon have to restructure their investment portfolios to bring it in line with the Volcker rule limiting risky trading by banks. At stake is the treatment of the Trust Preferred Securities (TRuPS), whose inclusion as “investments in entities referred to as covered funds” such as collateralized loan obligations and collateralized debt obligations, would oblige banks to divest them in compliance with the Volcker rule.

The intent behind the complex Volcker rule is clear. It is aimed at limiting the exposure of banks to certain type of “covered funds” such as hedge funds or private equity funds to 3 percent, and to prevent them from engaging in proprietary trading, namely, trading with their customers’ funds for their own short term gains rather than trade on their clients’ behalf. It is, therefore, a rule to make banks’ investments less risky and more transparent. (more…)

Regulators release public portions of resolution plans for smaller banks

By Bora Yagiz, Compliance Complete

NEW YORK, Jan. 16 (Thomson Reuters Accelus) – The Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) released the public portions of resolution plansfor 116 institutions that submitted plans for the first time in December 2013, a group comprising smaller banks affected by Dodd-Frank requirements for winding-up plans.

The Dodd-Frank Act requires that bank holding companies (and foreign companies treated as bank holding companies) with total consolidated assets of $50 billion or more and nonbank financial companies designated for enhanced prudential supervision by the Financial Stability Oversight Council periodically submit resolution plans to the Federal Reserve Board and the FDIC. Each plan must describe the company’s strategy for rapid and orderly resolution in the event of material financial distress or failure of the company, and include both a public and confidential section. (more…)

U.S. SEC releases 2014 exam priorities; exchanges, retirement in focus

By Nick Paraskeva, for Compliance Complete

NEW YORK, Jan. 15 (Thomson Reuters Accelus) – The U.S. Securities and Exchange Commission on Thursday published the 2014 priorities for its national examination program (NEP). Prominent among the priorities were scrutiny of “perceived control weakness” at financial exchanges and oversight of retirement investments.

The NEP’s examination priorities address issues that span the entire market, such as fraud, retirement rollovers and older investors, corporate governance, enterprise risk-management and technology. In addition, each of the NEP’s four program areas: investment advisers and investment companies, broker-dealers, exchanges and self-regulatory
organizations, and clearing and transfer agents, have individual focus areas. (more…)

FINRA exam priorities for 2014 incorporate enterprise wide, risk-based approach

By Nick Paraskeva, for Compliance Complete

NEW YORK, Jan.7 (Thomson Reuters Accelus) - Broker dealers have been put on notice of regulatory priority areas where they will be examined in 2014. The topics seen as posing greatest risk to investors and markets were issued in a letter by the Financial Industry Regulatory Authority (FINRA) on the first day of the year. They include new areas such as seeing patterns of suspicious activity by representatives, including questioning firms why they hired the persons.

“We encourage firms to use this guidance along with their own analysis to enhance their programs as we will be examining for strong controls and robust compliance efforts in these areas” stated Susan Axelrod, FINRA Executive Vice President, Regulatory Operations, on release of the letter to member firms. (more…)

Volcker could lead to boom in compliance hiring, says recruiter

By Emmanuel Olaoye, Compliance Complete

WASHINGTON/NEW YORK, Jan. 6 (Thomson Reuters Accelus) - The adoption of the Volcker rule by five U.S. regulatory agencies last week means that thousands of lawyers and compliance professionals will be working overtime to understand how to comply with the rule while keeping within the spirit of the law.

The Volcker rule, part of the 2010 Dodd-Frank Act, aims to stop banks from betting on their own capital or making investments in hedge funds and private equity funds. To comply, banks must report certain trading metrics that prove that they are involved in market making or hedging, and not making proprietary bets.  (more…)

U.S. Treasury cautions Bitcoin businesses on compliance duties, advocate cites ‘chilling effect’

By Brett Wolf, Compliance Complete

NEW YORK, Jan.6 (Thomson Reuters Accelus)  - The U.S. Treasury Department’s anti-money laundering unit has mailed roughly a dozen letters to businesses linked to the digital currency Bitcoin warning they may be money transmitters and be required to comply with federal law and regulation, a Treasury spokesman told Compliance Complete.

These letters, sent in recent weeks by Treasury’s Financial Crimes Enforcement Network (FinCEN), are a form of “industry outreach” aimed at making Bitcoin businesses aware of their potential anti-money laundering compliance obligations, FinCEN spokesman Steve Hudak said.  (more…)

FDIC adds more flesh to “single point of entry” resolution plans, but questions remain

By Henry Engler, Compliance Complete

NEW YORK, Dec. 18 (Thomson Reuters Accelus) – The Federal Deposit Insurance Corporation, under mounting pressure from the industry for greater clarity, announced on Tuesday additional details on its “Single Point of Entry” resolution plans for failed banks.
The basic concept is to close the holding company of a failed firm, and transfer its healthy subsidiaries into a new bridge institution that could be managed while the resolution of the defunct company proceeds. Shareholders would be wiped out under the plan, while unsecured creditors could seek equity claims as a means to recapitalize the new institution. Should the subsidiaries require liquidity to operate, they would borrow from the bridge, which in turn may borrow from an “orderly liquidation fund” funded by the U.S. Treasury. (more…)

U.S. Volcker Rule places major new demands on compliance

By Nick Paraskeva, for Compliance Complete

NEW YORK, Dec. 17 (Thomson Reuters Accelus) – The Volcker Rule final version adopted on Tuesday by U.S. regulators imposes significant compliance demands on banks, with stricter prohibitions on proprietary trading than the initial proposal two years ago, narrower exemptions for market making and hedging and a requirement that chief executives are now required to annually certify to regulators that such a compliance plan is in place.
“As a foundation, the final Volcker Rule requires banking entities to have a robust compliance program, including defined limits on market making, underwriting and hedging activities as well as continuous monitoring and management of such activities. It also requires reporting to regulators on specific metrics and trading details,” U.S. Commodity Futures Trading Commission Chairman Gary Gensler said as the rule was adopted. (more…)

  •