Governance, Risk & Compliance

COLUMN: Picture set to clarify for captive reinsurance regulatory muddle

COLUMN: Picture set to clarify for captive reinsurance regulatory muddle

The regulatory environment for captive reinsurance, the technique used by life insurance companies to leverage statutory reserves seen as redundant and free up capital for other purposes, may soon come to a head after being in flux since 2013 .

This is when the New York State Department of Financial Services (New York DFS) began a quest to protect policyholders and taxpayers and stamp out the practice, which it dubbed “financial alchemy.” (more…)

Spoofing or just fast trading? Chicago case helps unwrap mystery

REUTERS/Akhtar Soomro

Compliance professionals were startled when a jury in the futures industry’s home base of Chicago convicted a veteran commodities trader of “spoofing,” a crime punishable by up to 25 years in prison but involving a kind of market manipulation once thought too vaguely defined to be prosecuted. It was surprising that a case of such complexity could be brought to such a conclusion, even more that jurors took just an hour of deliberation to do so.

Compliance officers are on a crash course to learn the implications of the case at a time when high-speed trading still accounts for nearly half of the trading volume on markets. The Chicago case also provides a precedent in the higher-profile U.S. case of a London trader accused of a spoofing scheme that allegedly led to the “Flash Crash” in 2010. Spoofing involves traders entering and quickly canceling large orders in an attempt to manipulate prices. (more…)

IMPACT ANALYSIS: Ontario regulator’s review cites suitabilty, know-your-customer lapses at exempt market dealers

IMPACT ANALYSIS: Ontario regulator's review cites suitabilty, know-your-customer lapses at exempt market dealers

The Ontario Securities Commission has highlighted Know-Your-Customer (KYC) deficiencies as one of the significant compliance problems facing exempt-market dealers in Ontario. The annual report by the OSC’s Compliance and Registrant Registration branch (CRR) of the Ontario Securities Commission signals that the market regulator of Canada’s financial capital is becoming increasingly more concerned that inadequate KYC efforts by registrants is leading to exempt securities being sold to investors who fail to qualify under a prospectus exemption. (more…)

Message to sports chiefs: stamp out bribery or lose your sponsors


This week suspended FIFA president Sepp Blatter made some jaw-dropping revelations to Russia’s Tass news agency about how the World Cup bidding process was run. But football’s sponsors will also have noted this observation from Blatter:

“You cannot destroy FIFA,” he said. “FIFA is not the Swiss bank. FIFA is not a commercial company.”

This follows hard on the heels of comments from Formula 1 chief Bernie Ecclestone, who defended Blatter on Russian TV, claiming corruption should be considered as a tax that has to be paid: (more…)

COMMENTARY: SEC needs scalpel instead of chainsaw in revising beneficial ownership rules

REUTERS/Jonathan Ernst

The U.S. Securities and Exchange Commission is considering whether and how to stop the regulatory arbitrage by shareholder activists of gaps in Securities Exchange Act disclosure requirements, which activists have exploited to gain significant stakes in public companies before incumbent management notices. Shareholders may be best served if the SEC takes a scalpel rather than a chainsaw to address the issue. (more…)

Income-based auto insurance pricing: The trigger for the FIO’s use of subpoena power

Judge and gavel in courtroom

In a recent comment letter to the U.S. Federal Insurance Office (FIO) issued on July 2, 2015, around 50 state and national consumer groups advocated the idea of income-based pricing for auto insurance premiums.

The letter brings a consumer perspective to issues that could pose significant changes to the auto insurance market. Besides the potential changes that pertain to the price of auto insurance for low- and moderate-income (LMI) drivers, the very nature of income-based auto insurance pricing is also the likely trigger for the FIO’s first use of subpoena power. Such use is likely to be the greatest exercise of federal power in the property and casualty marketplace in recent history. (more…)

U.S. regulatory guidance improves quality of resolution plans, but more work remains

U.S. regulatory guidance improves quality of resolution plans, but more work remains

Banks need to improve data management and reporting practices in their U.S. mandated resolution plans, but they have nonetheless made progress in meeting regulators’ expectations with the help of customized playbooks on issues such as governance, reporting, and management information systems, participants learned in a webinar by consultancy Deloitte. (more…)

UPDATED: IMPACT ANALYSIS: Saba Capital sued by investor over valuation practices; is SEC next?

UPDATED: IMPACT ANALYSIS: Saba Capital sued by investor over valuation practices; is SEC next?

A recent U.S. lawsuit filed by the Public Sector Pension Investment Board of Canada against hedge fund manager Saba Capital Management has drawn attention to fund valuation procedures.

The case pits one of the world’s largest pension managers against a well-known hedge fund. Institutional pension allocators, hedge fund managers, lawyers, accountants, auditors and compliance professionals everywhere are sure follow the case and take note of its resolution. More importantly, valuation procedures, which are at the core of the case, are also a top concern at the U.S. Securities and Exchange Commission (SEC). (more…)

The SEC’s Cybersecurity Risk Alert – First steps for firms

REUTERS/Kacper Pempel

On September 15 the SEC’s Office of Compliance Inspections and Examinations (OCIE) issued a new Risk Alert relating to cybersecurity. In it, the SEC reemphasized the intention of the Commission to conduct a second phase of cybersecurity examinations of Investment Adviser firms, thereby proving the regulator is keeping the promises made in its 2015 Examination Priorities released in January 2015. (more…)

Broker-dealers face big compliance challenge, new costs in FINRA stress tests

REUTERS/Akhtar Soomro

Broker-dealers who have been largely spared the burden of the painful stress testing that major bank faced after the financial crisis of 2008 will finally taste some of the medicine given to the financial giants.

The Financial Industry Regulatory Authority this week issued guidance on liquidity risk management. The move suggests that five years after the 2008 crash broker-dealers need to upgrade and invest in significant new measures in preparation for the next perfect storm. FINRA will follow up on the new directive with reviews and stress tests on individual firms. (more…)