consumers and financial regulation: december 2008 December 2, 2008
Posted by Bradley in : Uncategorized , comments closedAs of this morning, David Lipsey no longer chairs the UK’s Financial Services Consumer Panel. His tenure was short – he became Chair in June of this year, and seems to have had different views about the role of the panel from those of other members of the Panel and of the FSA. The FSA’s statement reads:
In addition to the traditional activities of the Consumer Panel, David has proposed a much wider remit, with a role across a wide lobbying agenda supported by greatly increased resources. The members of the Consumer Panel did not, however, share David’s belief that this changed and wider role was appropriate, nor did the FSA believe that the change from the existing role was required.
Lipsey’s resignation letter states:
Over my six months in office, I have sought to promote a significant change of role for the Panel to tackle consumer financial services issues in a broader sense. This has become more urgent in my view as a result of the blow to consumer confidence resulting from the financial crisis.
This approach has not won the support of the FSA or of the panel as a whole. Additionally, the increased resources required to sustain that altered role will not be made available. In those circumstances, the panel requires a change of leadership.
Only a few days before the announcement of his resignation, Lipsey made some critical comments at a FSA conference on its retail distribution review. This development raises some questions about whether it is really possible to have effective representation of consumer interests in a structure where the consumer representation is funded by a regulator which is committed to not frightening regulated firms too badly.
eu depositor protection proposals and the uk parliament November 25, 2008
Posted by Bradley in : Uncategorized , comments closedThe UK House of Commons European Scrutiny Committee has been considering the proposed directive on depositor protection which has been put forward on the basis of limited consultation. The Committee had some issues:
we …understand why it is felt necessary to push through this draft Directive speedily, even without a proper impact assessment and public consultation. Nevertheless we are concerned that the rush should not lead to ill-considered and flawed legislation. Moreover we note that:
– the Government has a number of practical questions to which it needs answers; and
– it seems implicit in the Minister’s comments about the balance between the responsibilities of the Commission, the Council and Member States that the Government is not convinced about the Lamfalussy process arrangements in the present text of the draft Directive.. So we recommend that this document …should be debated in European Committee
sound regulation November 17, 2008
Posted by Bradley in : Uncategorized , comments closedThe G20 declaration contains a call for “sound regulation”:
We pledge to strengthen our regulatory regimes, prudential oversight, and risk management, and ensure that all financial markets, products and participants are regulated or subject to oversight, as appropriate to their circumstances. We will exercise strong oversight over credit rating agencies, consistent with the agreed and strengthened international code of conduct. We will also make regulatory regimes more effective over the economic cycle, while ensuring that regulation is efficient, does not stifle innovation, and encourages expanded trade in financial products and services. We commit to transparent assessments of our national regulatory systems.
It remains to be seen whether sound regulation is in fact sound (better regulation pretty clearly wasn’t in fact better).
trusts and choice of law November 2, 2008
Posted by Bradley in : Uncategorized , comments closedIn Jose Gonzalez Gomez V Encarnacion Gomez-Monche Vives (Court of Appeal Oct. 3, 2008) the Court of Appeal was faced with figuring out the domicile of a trust for the purposes of Article 5(6) of the Jurisdiction and Judgments Regulation which provides that:
A person domiciled in a Member State may, in another Member State, be sued… as settlor, trustee or beneficiary of a trust created by the operation of a statute, or by a written instrument, or created orally and evidenced in writing, in the courts of the Member State in which the trust is domiciled
The trust in question was established under a declaration of trust by a Jersey corporation (specifying English law as the proper law), the settlor was a Spanish domiciliary, the main assets were shares in a corporation incorporated in the Cayman Islands, and the trust was administered in Liechtenstein. At the time of the litigation the trustees were corporations incorporated in BVI and Liechtenstein. The only connection with England was the choice of English law as the proper law.
Lord Justice Lawrence Collins says that other factors are not to be taken into account where there is an express choice of English law. Choice of law with respect to trusts is different from choice of law with respect to contracts:
The connection between a trust and its proper law is in every sense real and close. A trust is not like a commercial contract where it is only necessary to consider the content of the applicable law in exceptional circumstances. trustees in particular have to be intimately aware of their responsibilities under the general law applicable to the trust. They may have to know whether they can lawfully accumulate income. Resort to the law governing the trust is central to their responsibilities.
But the Lord Justice also states that a choice of foreign law to govern a trust which would otherwise be governed by English law might be treated differently!
virtual world murder – real world consequences October 24, 2008
Posted by Bradley in : Uncategorized , comments closedIt seems that a women has been arrested in Japan for using a borrowed (without consent) password to access Maple Story and kill the avatar who had just divorced her avatar, because she was extremely angry about the divorce. The news story headlines describe this as “online ‘murder'” (Guardian) although the text of the stories makes it clear that she was arrested for the hacking, rather than for the murder – a much less interesting – even uninteresting – story, as the article in the Independent (headlined with a reference to “murder by mouse”) points out, as does Greg Lastowka at Terranova. The Guardian article states that:
Bad online behaviour is usually dealt with within the rules set up by online worlds, which can ban miscreants or confiscate their virtual possessions…virtual crimes can also have consequences in reality.
This seems to me to miss the point if the arrest is for the hacking (a real world act, if you like) rather than for the avatar destruction.
The Fox news version of the story makes a link with other examples where “virtual lives have had consequences in the real world” – and here there is perhaps more to say. Rejection in a virtual world may be harder to take than participants might anticipate. But the purpose of the news stories seems to be the usual virtual world sensationalism rather than anything real. Is this really a more interesting story than if a spurned partner slashes her ex-partner’s suits? And is it more appropriate for criminal law enforcers to intervene in a domestic dispute involving hacking than in one involving hacking jackets?
On the other hand, perhaps we need the distraction of stories like this in the middle of the financial market rollercoaster ride.
forthcoming symposium at um October 20, 2008
Posted by Bradley in : Uncategorized , comments closedThe Jean Monnet Chair and the Miami/FIU European Union Center of Excellence are holding a symposium on Europe’s Constitution: the EU Treaties on Tuesday, November 18, from 3:30-6:30 PM in Merrick 307, at the University of Miami. Speakers include Finn Laursen of Dalhousie University and the Consuls General of France, Italy and the Netherlands.
eu proposed revisions to depositor protection October 16, 2008
Posted by Bradley in : Uncategorized , comments closedThe Commission has published proposals to revise the deposit guarantee schemes directive, which are designed to implement the Council’s recent decisions. The document notes that normal processes have been distorted in current emergency conditions:
Due to the urgency of the matter, neither an impact assessment nor a public consultation could be carried out for the current proposal.
Immediately after recognizing this failure to follow normal processes, the Commission points out in the proposal that it has been thinking about deposit guarantee schemes for the last couple of years or so. But that thinking isn’t very relevant, as it seemed to lead in a direction different from the one in which we are now travelling.
In late 2006 the Commission published a Communication which addressed the issue of coinsurance in this way:
At this stage, there would appear to be insufficient support to introduce any short-term change to co-insurance rules. In general, there seems to be no agreement among stakeholders about whether the underlying principle of moral hazard, (i.e. the risk that, because their deposits are insured in any case, depositors choose a bank without first assessing its soundness) justifies its application. Some consider co-insurance an indispensable element in preventing moral hazard, while others, in particular consumer associations, argue that depositors should not be placed in a position whereby they are expected to judge the soundness of the credit institution.
In the light of these dissenting views, the Commission is not convinced that at this stage a change to the co-insurance rules would be justified.
The new proposal addresses the coinsurance issue as follows:
This has proven counterproductive for the confidence of depositors and may have exacerbated the problems. The argument of moral hazard (depositors should be ‘punished’ if they deposit their funds at a bank offering high interest rates but incurring high risks) is not tenable since retail depositors cannot, in general, judge the financial soundness of their bank. Consequently, this option should be discontinued.
proposed revision of eu consumer protection October 9, 2008
Posted by Bradley in : Uncategorized , comments closedShopping doesn’t seem to be most people’s top priority in current market conditions. But perhaps this means that it is a good time to think about consumer protection. The Commission published yesterday a new proposed consumer protection directive to collect and revise existing EU consumer protection rules. The proposal is designed as a “full harmonisation” measure. Article 4 states:
Member States may not maintain or introduce, in their national law, provisions diverging from those laid down in this Directive, including more or less stringent provisions to ensure a different level of consumer protection.
This is supposed to mean that traders can use the same contract terms in all Member States. At the same time consumer protection is increased in some respects. There are new lists of banned terms in consumer contracts (a black list) and of terms which are presumed to be unfair (a grey list). The proposal has some relevance to financial services, but does not apply to circumstances covered by the Distance Marketing of Financial Services Directive or the Consumer Credit Directive.
competitive depositor protection October 5, 2008
Posted by Bradley in : Uncategorized , comments closedDepositor protection has been a subject of controversy in the EU before now (for example, the negotiations which led to the adoption of the deposit guarantees directive). But no sooner had Peter Mandelson taken the helm of the Department for Business, Enterprise and Regulatory Reform (the “Voice for Business Across Government” – Better Regulation Department) (a very apt appointment, as he has direct, personal, experience of some of the causes of current financial market turmoil – misleading disclosures/non-disclosures to mortgage providers) than Germany announced that it was going to improve protections for depositors with German banks. It’s just not cricket.
the future of florida courts September 30, 2008
Posted by Bradley in : Uncategorized , comments closedA recent press release from the Florida Courts announces a number of public meetings:
Think of the changes Florida has undergone in the last two decades — and imagine the changes that will take place in the next two decades.
As Florida changes, so too must Florida courts. Sheer population growth will increase the number of cases coming into the courts. Significant changes in demographic and societal trends will alter the kinds of cases that the courts must resolve. Economic changes will impact the resources available to handle cases. Emerging technologies will change the ways people interact with each other and with the courts.
Florida’s judicial branch is working on a long-range strategic plan so that the courts can respond to new challenges and stand firm as a strong cornerstone of a well-functioning society and a healthy economy. And it wants to hear from people around the state as it develops its plan.
The Supreme Court Task Force on Judicial Branch Planning will hold nine meetings around the state, including in Miami. The Task Force is inviting citizens and local officials to share their thoughts on trends and conditions that they believe will impact the ability of the judicial branch to carry out its mission over the next 20 years. The current strategic plan for the Florida judicial branch, which can be found at www.flcourts.org/gen_public/stratplan/index.shtml, includes the mission and vision of the branch.
One of the meetings is this coming Thursday from 4-7pm at the Coral Gables Branch Library, 3443 Segovia Street, Coral Gables, Florida.