Financial Regulatory Forum

SEC faces challenges before fast-trading reforms can go on the books

By Emmanuel Olaoye, Compliance Complete

The Securities and Exchange Commission has rolled out its intentions to regulate high-frequency trading, making stricter regulation in some form a strong possibility, but the agency faces more work and some challenging obstacles before it can put new rules in the books.

SEC Chair Mary Jo White in a speech last week outlined her goals for regulating high-frequency trading (HFT), at a time when political interest over the fairness and risks of the practice has surged in the wake of a best-selling book by financial writer Michael Lewis.

White‘s intentions for regulating high-frequency trading, which has taken a dominant role in U.S. equity markets, include registration requirements for proprietary fast-traders. Under such rules, firms registering as broker dealers would have to meet net capital requirements and establish adequate risk management controls.

The agency is also working on a rule to restrict disruptive trading rule. The rule would apply to proprietary traders in “short time periods when liquidity is most vulnerable and the risk of price disruption caused by aggressive short-term trading strategies is highest.”

The initiatives sound good on the surface but the SEC needs to work out the details, said Bernard Donefer, a professor of information systems in financial markets at Baruch College in New York. This includes learning more about the trading strategies of HFT firms before forcing them to register.

Expect corruption crackdown to widen, intensify

By Stuart Gittleman, Compliance Complete

NEW YORK, Apr. 15, 2014 (Thomson Reuters Accelus) – Companies and financial firms that are potentially subject to the Foreign Corrupt Practices Act and other anti-corruption regimes should expect more of the enforcement crackdown they have seen in recent years, except in greater quantity and intensity, two former U.S. government officials said last week.

The ex-officials, Cheryl Scarboro, a law partner at Simpson Thacher & Bartlett, and Greg Andres, a partner at the law firm Davis Polk & Wardwell, respectively headed the Securities and Exchange Commission Enforcement Division FCPA unit and the Department of Justice Criminal Division fraud section. They spoke at an FCPA and anti-corruption seminar at the New York City Bar Association. (more…)

The JOBS Act at age two – prodigy or enfant terrible?

By Stuart Gittleman, Compliance Complete

NEW YORK, Apr. 3, 2014 (Thomson Reuters Accelus) - The financial services industry is still getting used to the two-year old JOBS Act, as funds gingerly begin to explore new general-solicitation freedoms and “crowdfunding” venues sort through the rules, speakers said at a Fordham Law School forum in New York.

As mandated by the JOBS – or Jumpstart Our Business Startups – Act enacted in April 2012, the Securities and Exchange Commission has adopted rules for general solicitations that became effective in September 2013, and is reviewing comments to a December 2013 set of proposed crowd-funding rules. (more…)

Book by high-profile author Lewis may spur high-frequency-trading reform push, success unclear

By Emmanuel Olaoye, Compliance Complete

WASHINGTON/NEW YORK, Apr. 2, 2014 (Thomson Reuters Accelus) - During a clip on Sunday night’s “60 Minutes” program, host Steve Kroft asked bestselling author Michael Lewis why he was so opposed to high frequency trading.

“If it wasn’t so complicated, it would be illegal,” said Lewis, who is the author of a new book called “Flash Boys: A Wall Street Revolt.”  (more…)

“Big data” tools will improve regulatory oversight, FINRA’s di Florio says

By Stuart Gittleman, Compliance Complete

NEW YORK, Feb. 25 (Thomson Reuters Accelus) - The Financial Industry Regulatory Authority is developing a suite of “big data” information sources and analytics to improve regulatory oversight of securities firms, according to Carlo di Florio, FINRA’s chief risk officer and head of strategy.

Leveraging technology and analytics can make for a “unique moment in regulation [that lets regulators] see things they couldn’t have seen or understood as well before,” di Florio said at an event this week hosted by the Securities Industry and Financial Markets Association compliance and legal society. (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…)

Groups urge Congress to let SEC charge fees for adviser exams

By Emmanuel Olaoye, Compliance Complete

WASHINGTON, Dec. 13 (Thomson Reuters Accelus) - A coalition of groups representing investment advisers and state regulators has asked Congress to support a bill that would let the U.S. Securities and Exchange Commission to charge investment advisers an annual “user fee” for its exams.

In a letter sent to Congress last week, the coalition said the user fees collected by the SEC would fund the agency’s examinations of registered investment advisers.  (more…)

Largest U.S. banks see themselves in “regulatory spiral” with no clear end

By Henry Engler, Compliance Complete

NEW YORK, Dec. 4 (Thomson Reuters Accelus) – Although five years have passed since the height of the financial crisis, top lawyers at some of the largest U.S. banks see themselves pitted in an escalating, and at times adversarial, battle with regulators, the end of which remains unknown.

At a conference sponsored by the Clearing House on Friday, senior legal representatives from JPMorgan and Bank of America painted a picture of unprecedented enforcement actions and fines across a wide range of issues, adding that the zeal of recent actions could potentially disrupt the supervisory and cooperative relationship that has long existed between banks and regulators. (more…)

SEC aims to loosen rules on foreign broker-dealers in U.S., official says

By Nick Paraskeva, for Compliance Complete

NEW YORK, Nov. 26 (Thomson Reuters Accelus) - U.S. securities regulators are looking to loosen rules for foreign-broker dealers acting in the U.S. on a cross-border basis. The change would come in the wake of new policy being adopted to implement derivatives cross-border rules under Dodd-Frank. The reform was outlined by John Ramsay, Acting Director, Division of Trading and Markets of the Securities and Exchange Commission (SEC).

Rulemaking priorities at the SEC division include the Volcker rule on proprietary trading, derivatives and a proposal for firms and exchanges to test major systems. New data sources and analytics will impact new rules on equity market structure and infrastructure improvements, Ramsay said on Tuesday at the Securities Industry and Financial Market Authority’s (SIFMA) Legal and Compliance Society. (more…)

JPMorgan’s massive spending on controls underlines “aggressive” relations with regulators

By Henry Engler, Compliance Complete

NEW YORK, Sept. 24 (Thomson Reuters Accelus) - What was once a more consultative relationship between JPMorgan and its regulators has turned into an environment of aggressive demands to reshape the banking giant, say bankers.

With news the largest U.S. bank has settled one set of charges for $920 million and is bracing for more legal and regulatory scrutiny in the coming weeks and months, insiders say the most noticeable change has been the regulators’ use of “consent orders” to enforce wholesale changes across the institution’s risk management controls and systems. (more…)

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