Focusing on too-big-to-fail policies and hard-to-implement resolution plans may lead regulators to miss the next big financial failure, which could come in the areas of shadow banking and short-term financing, industry experts said.
This was the main message given by a panel of experts at a conference organized by the Clearing House, a banking association and payments company on Thursday. (more…)
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…)
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…)
The U.S. Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) may be far from putting the final touches on titles I and II of the Dodd-Frank Act — the preparation of resolution plans within the framework of enhanced prudential standards, and the authority of FDIC to become the receiver of a failed non-bank financial or holding company and unwind it respectively. But comments by regulators and a conference in Washington last month held by the Federal Reserve Board and Federal Reserve Bank of Richmond on the topic reveal that some consensus is emerging on the structure and implementation of the resolution regime as well as its future course. (more…)
The largest institutions on Wall Street could go a long way towards reducing risky behavior if they changed the way top levels of management are incentivized and compensated, and incorporated elements of a partnership model, says a former Goldman Sachs banker.
Taking a page from Goldman’s bygone management structure, Steven Mandis, now a professor at Columbia University, argues that one needs to think creatively of how to replicate the incentives, and ultimately the behavior, that was at work in the partnership model. (more…)
The U.S. hedge fund industry will be deluged with on-site examinations over the next three years, as the Securities and Exchange Commission broadens its oversight of this sector with a focus on strategy, valuation processes and “side pockets,” a leading securities litigator said on Wednesday.
“Hedge funds are far more likely to get an audit in the next three years than ever before,” said Liam O’Brien, a partner at McCormick & O’Brien in New York. Speaking at a conference sponsored by the law firm Citrin Cooperman, O’Brien, who has faced off with the SEC across a range of issues facing fund managers, said the agency was poised for a “dramatic increase in onsite exams.” (more…)
Last Monday’s announcement that the hedge fund SAC Capital Advisors will pay $1.8 billion and hire a compliance monitor to settle insider trading charges highlighted the importance of outside compliance monitors in modern financial services enforcement.
SAC pled guilty on Friday to criminal fraud charges as part of a $1.8 billion deal with the Department of Justice to resolve a decade-long investigation into insider trading at the firm. (more…)
A recent report offered by the regulators of investment advisers with less than $100 million in assets under management found 6,482 adviser deficiencies during a six month period of examinations.
The deficiencies were detected in 20 compliance areas with the top three deficiencies involving books and records, registration and contracts. A review of the specific deficiencies in each compliance area unveiled that many of them could be considered simple or administrative tasks (i.e. incomplete or inconsistent core documents) that should have been managed and detected by an effective compliance program. (more…)
The number of Swap Execution Facilities (SEFs) could be halved within the first year as derivative platforms launched October 2 either consolidate or drop out of the market, a pattern that industry observers say has been seen during past periods of electronic transformation.
Many point to the fixed-income trading world, where an initial plethora of electronic venues in 2001 eventually dwindled to a few. The swaps market, they say, will be no different. In addition, bankers point to the reluctance by buy-side investors to embrace SEFs, fueled partly by expectations of consolidation as well as the costs of connectivity. (more…)
Regulatory burdens have been a major factor driving banks to reduce their balance sheets, pull out of some foreign operations, close a number of businesses, consulting firm Deloitte says in a report.
The report describes a trend by banks to specialize in certain business areas and leaving others, as the financial crisis of 2008-2009 and the regulatory response it spurred emerge to shape bank structure, along with more traditional factors including changing market conditions and a desire to simplify organizational structures. (more…)