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Regulatory
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Former SEC Chair Levitt Says Since SEC Did Not Pursue Money Fund Reform, FSOC Certainly Should |
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Tuesday, February 26, 2013 12:53
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Tags: marketing | mutual funds | sec
Former SEC chair Arthur Levitt says the SEC blew its chance to fix the money fund problem. He refused to sign a letter prohibiting another regulatory body (namely, the Financial Stability Oversight Council or FSOC) from doing the job for the commission.
He says the funds were at the heart of the 2008 crisis. When the Reserve Primary Fund broke with the $1 per share NAV, it caused a run on the funds that the Treasury had to put a plug in at the cost of hundreds of billions of taxpayer dollars. This Website Is For Financial Professionals Only
An investment thought to be stable and highly liquid turned out to be unreliable and subject to market volatility.
When former chair Mary Schapiro made money fund reform her primary focus, fund companies essentially roadblocked any new rules. They even blocked Schapiro’s effort to garner non-binding public comment.
But at every point in the sequence, Levitt says the SEC could have defied industry opposition.
The FSOC makes this point quite clearly in its review.
The letter designed to keep the FSOC from interfering has the wrong focus. The FSOC is only taking action because the SEC did not.
Levitt says it is natural for former regulators to defend the independence of the agencies in which they were formerly involved.
But the need to protect the public rises above the need to preserve agency independence. Levitt states that if the SEC does not fulfill that mandate, then the FSOC should. |
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FINRA Reissues Controversial Business Practice Rules Of 2010 |
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Wednesday, February 20, 2013 14:07
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Tags: FINRA | regulation | SIFMA
FINRA is reissuing a set of controversial rules for advisors. The original rules were issued in 2010 and comments signaled that the requirement for 30-days’ notice from its members for changes in a number of routine business activities was too far-reaching. This Website Is For Financial Professionals Only
The original rules demanded that FINRA receive advance notice of new products or services, increases in personnel after a certain threshold, notification of transactions involving 10% or more of a firm’s ownership, and changes in a firm’s service providers.
The changes would then be subject to a formal approval process by FINRA in an effort to prevent fraud at broker-dealers and their affiliates.
SIFMA urged FINRA to revamp the proposal and do away with many of its requirements. The Financial Services Institute Inc. (FSI) stated in a letter that the new rules would extend FINRA’s jurisdiction well beyond traditional limits.
The revision is said to include provisions to address regulatory issues FINRA has identified and to codify existing practices and interpretations.
Read more...
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POGO Report Shows Possible Influence Of Wall Street Executives On SEC Policy And Enforcement Decision Making |
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Monday, February 11, 2013 13:05
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Tags: Morgan Stanley | regulation | sec
A report published by the Project on Government Oversight (POGO) just a few weeks after Mary Jo White was nominated to head the SEC shows that there was a revolving door between Wall Street executives and SEC staff.
A case study on money market fund lobbying shows how SEC staff that are now working in the private sector could have influenced the SEC’s ability to push through reforms in policy and enforcement over the past ten years. This Website Is For Financial Professionals Only
The report calls for reforms to help prevent such influence from continuing, saying the close relationship between regulators and those they regulate can impact the culture, the mindset, and the values of the agency.
Suggested reforms include requiring agencies to post disclosure statements online, the time frame for filing post-employment statements, and extending the cooling off periods for employees who enter and leave the government.
The report cites a long list of commissioners who questioned then SEC chair Mary Schapiro’s proposed reforms to money market funds.
Three commissioners refused to support putting the reforms out for comment.
The report also cites White’s appointment as another revolving door example, citing her hiring by Morgan Stanley’s board to determine whether John Mack, its prospective chief executive at that time, had any exposure to the SEC’s insider trading investigation into Pequot Capital Management.
Providing selective access to senior SEC officials during such an investigation caused the SEC to reveal small bits of information about a private investigation to a potential defendant’s prospective employer.
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FINRA Puts SRO Priority On Back Burner, Noting Little Momentum In Congress In Support Of The Measure |
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Friday, February 08, 2013 04:03
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Tags: Congress | Dodd-Frank | FINRA
FINRA is putting its plans on hold to become the SRO to oversee investment advisors.
Noting that there seems to be little momentum in Congress to create an SRO to help the SEC examine more advisors on an annual basis, FINRA chief executive Richard Ketchum insists he is not giving up. This Website Is For Financial Professionals Only
He and backers for the SRO continue to assert it would increase investor protection by amplifying resources beyond the SEC’s current capacity.
A study mandated by the Dodd-Frank Act showed that the SEC could conduct annual examinations of only 8% of the 12,000 advisors under its watch.
After some adjustments made relative to Dodd-Frank, the SEC now oversees about 11,000 advisors.
FINRA examines its 4275 registered broker-dealers approximately once every two years.
FINRA has lobbied hard in Congress for two years to become the SRO but the effort died out after the Bachus-McCarthy bill failed to make its way to a vote.
Investment advisors are opposed to the SRO legislation, saying a new layer of regulation is unnecessary and costly.
FINRA may be rethinking its legislative priorities but advisors should not think the matter will simply go away.
FINRA has the backing of the Financial Services Institute Inc. (FSI), which says FINRA is reassessing the situation but is not giving up.
Since the SRO matter has moved down on the priority list, FINRA will likely focus on broker-dealer conflicts, structured products, and high-frequency trading.
Read more...
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FINRA Pulls Proposal To Eliminate 5% Rule As A Result Of Commentary |
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Tuesday, February 05, 2013 12:22
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Tags: FINRA | regulation | trade Two years ago FINRA initiated a proposal that would update guidance regarding the 5% threshold for markups and markdowns. Commentary warned FINRA not to do away with the rule.
Now, the regulatory organization has backtracked on its proposal to do exactly that. As of last Thursday, FINRA’s website has an updated proposal that keeps the 5% threshold in place. This Website Is For Financial Professionals Only
Attorneys in the industry say that 5% is too much and the threshold should be more like 2% or 3%.
The Rule would be a component of Rule 2121 governing markups and markdowns and is part of FINRA’s continuing rule consolidation process.
FINRA is also trying to eliminate a proceeds rule that guides markups on round-trip transactions as well as a rule that mandates firms provide equity commission-rate schedules to clients.
The comment period ends April 1.
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