Financial Regulatory Forum

Regulators globally seek to curb supercomputer trading glitches

By Christopher Elias

LONDON, Aug. 31, (Business Law Currents) - A series of stock market glitches has prompted regulators around the world to introduce new regulations to limit the impact of computer malfunctions on trading. Shielding markets from another Knight Capital disaster, the new rules seek to defend market participants from malicious machines and risky robots. (more…)

Knight Capital crisis brings new push for rules on trading, technology, structure

By Nick Paraskeva

NEW YORK, Aug. 6 (Thomson Reuters Accelus) - The near-collapse of equity market maker Knight Capital after sending erroneous trades to the New York Stock Exchange last week is the latest in a string of errors causing heavy losses and disrupting markets. While smaller in dollar terms than losses from JPMorgan’s ‘London whale’ or UBS’ rogue trader, it is causing regulators to review firms’ compliance and controls over operational risks, and rules for restructuring of equity markets.

“The apparent trading error by Knight Capital Group reflects the type of event that can raise concerns for investors about our nation’s equity markets,” SEC chairman Mary Schapiro said on Friday. “I have asked SEC staff to accelerate ongoing efforts to propose a rule to require exchanges and other market centers to have specific programs in place to ensure the capacity and integrity of their systems”. (more…)

Collateral management reform could herald benefits for risk managers

By Rachel Wolcott

LONDON/NEW YORK, July 30 (Thomson Reuters Accelus) - Risk managers could benefit from the financial services industry’s revamp of collateral management services in preparation for the new regulatory requirements that will drive demand for high-quality collateral. New regulations for the clearing of over-the-counter (OTC) derivatives through central counterparties (CCPs) alone could increase demand for high-quality collateral to $2 trillion or more, according to some estimates. In response, some firms are aiming for a more universal approach to collateral management.

Many firms still take a rather old-fashioned view of collateral management. It is often fragmented and inefficient. Most firms operate collateral management in silos determined by geography or asset class. This can lead to poor communication between different collateral management functions — for example, repo staff might not speak to the securities lending unit, or the New York office might not speak to its UK counterpart as much or as often as it should.  (more…)

U.S. bank regulators warn on due diligence in using cloud computing services

By Emmanuel Olaoye

WASHINGTON/NEW YORK, July 13 (Thomson Reuters Accelus) – Bank regulators this week raised their warnings to financial institutions on the dangers of using vendors that provide so-called “cloud computing” services.

Cloud computing lets businesses outsource data storage and transactions to vendors that host remote datacenters that can only be accessed over the internet. The model allows the companies to change their information technology without buying and setting up new systems. (more…)

IA brief: State regulator’s deficiency letter offers clues for social-media policies

By Jason Wallace

NEW YORK, May 25 (Thomson Reuters Accelus) – A state regulator’s letter to an investment advisory firm outlining shortcomings in the firm’s use of social media also gives an early clue to how regulators will scrutinize the financial industry’s growing use of services like Facebook and LinkedIn.

The “exam deficiency” letter was provided by a source familiar with the case to Thomson Reuters on the grounds that neither the source nor the target of the letter be identified. Such letters, which specify areas in which a firm’s regulatory compliance falls short, are issued by a regulator after an examination of a firm. (more…)

Corporate governance: boardrooms fret over corporate espionage and federal guidance regimes

By Alex Lee

(Business Law Currents) – Dodd-Frank related governance issues such as say-on-pay and proxy access have been well known focal points for boardrooms during the 2012 proxy and annual meeting season, but another issue has topped headlines and is of increasing concern to boardrooms: business intelligence gathering activities. Faced with shareholder oversight, the risks posed by private intelligence gathering firms and governmental regulation in this area, companies must ensure that they abide by accepted best practices, the highest ethical standards and standards for compliance with laws.

Shareholders and governing bodies have enhanced scrutiny of corporate governance, with scandals such as MF Global highlighting abuses of corporate power and potential criminal activities by company officers. Effective corporate governance principles dictate that those who conduct unethical or, worse, illegal activities on behalf of a company must be brought to heel. (more…)

Corporate identity theft: a new realm in risk management

By Liz Osborne, Thomson Reuters Accelus contributing author

Nov. 7 (Thomson Reuters Accelus) – These days most people are aware of the dangers of someone stealing and misusing their identity to perpetrate fraud — but less people are familiar with the equivalent crime at a corporate level. Corporate identity theft (CIT) is the fraudulent and deliberate misrepresentation of a company’s identity. It is sometimes also referred to as a “white-collar crime” as it is generally conducted in a “cyber environment” and is not the domain of the stereotypical burglar.

Over the years we have seen a marked increase in this area due to the relative simplicity of the crime and the large degree of “trust” people have in doing business online. It is anticipated that in Australia alone consumers will transact more than A$10 billion dollars in 2012. (more…)

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