legislation, delegated legislation and financial emergencies September 30, 2008
Posted by Bradley in : Uncategorized , comments closedThe Bradford & Bingley Transfer of Securities etc Order was adopted yesterday under the Banking (Special Provisions) Act 2008 on an unusual schedule for UK statutory instruments:
3.1 It was not possible in the case of this Order to comply with the 21-day rule according to which relevant instruments are laid before Parliament for at least 21 days prior to coming into force. The Order was made at 7.40 a.m. on 29th September 2008, came into force at 8.00am on that day and then was laid before Parliament on that day.
3.2 It is important that the transfer of securities in Bradford & Bingley, and the transfer of certain property, rights and liabilities and other related matters, has effect as soon as possible following the making of the Order. It is in everyone’s interest for the transfer of shares and transfer of property to be effected as swiftly as possible to avoid uncertainty .
For many of the provisions of the Statutory Instrument, the speed is understandable. But some of the provisions don’t just address the urgent transfer of assets, but purport to alter primary legislation. For example, the Financial Services Act requires the FSA to publish draft rules and try to bring them to the attention of the public before acting to promulgate rules. The original exception to these requirements stated that they would not apply
if the Authority considers that the delay involved in complying with them would be prejudicial to the interests of consumers.
The Bradford and Bingley Amendment Order adds the following language:
or if it is making rules for the purposes of, or to facilitate or in consequence of, a transfer under section 3 or 8 of the Banking (Special Provisions) Act 2008.
Surely this provision would have been more appropriate in the Banking (Special Provisions) Act itself (which was itself enacted very speedily), rather than in a statutory instrument which came into effect 20 minutes after it was made by the Treasury and was only later laid before Parliament? On the other hand, the statute does seem to give the Treasury an incredibly (excessively?) general power to disapply statutory provisions or rules of law in section 12:
(1) The Treasury may by order make-
(a) such supplementary, incidental or consequential provision, or
(b) such transitory, transitional or saving provision,
as they consider appropriate for the general purposes, or any particular purposes, of this Act or in consequence of any provision made by or under this Act, or for giving full effect to this Act or any such provision.
(2) An order under this section may in particular-
(a) disapply (to such extent as is specified) any specified statutory provision or rule of law…
(not) understanding food risks September 26, 2008
Posted by Bradley in : Uncategorized , comments closedReading the recent news about melamine contamination of foods produced in China, and remembering how friends with pets dealt with last year’s pet food melamine contamination problem, I wonder how worried to be. A story which began with problems in infant formula spread to other products made with milk as an ingredient. For example, White Rabbit candy, which, according to the Wikipedia entry has been marketed as a healthy product, is one of the products affected. In deciding how worried to be I would like some data on the risks. The FDA website has a reassuring press release. This morning, the Europa website’s press release page showed a release from the European Food Safety Authority (EFSA) with a link to a detailed statement assessing the risks (unfortunately, since I first saw the press release it has been pushed off the front page by other news). I’d far rather have details than platitudes, even where the details don’t in the end help me very much. (more…)
regulation and the financial crisis September 23, 2008
Posted by Bradley in : Uncategorized , comments closedAlongside the issue of what sort of bailout may be appropriate to stop the financial markets imploding (Richard Epstein argues that bad regulation isn’t the right answer), is the issue of how financial regulation should be amended to prevent such risks of implosion for the future. Dominique Strauss-Kahn of the IMF has written:
There is a deeper structural issue to be resolved. This crisis is the result of regulatory failure to guard against excessive risk-taking in the financial system, especially in the US. We must ensure it does not happen again. Work has started to rebuild the architecture and the leading industrialised countries have already put forward recommendations for better prudential regulation, accounting rules and transparency. The role of credit rating agencies will also need to be rethought, with greater public scrutiny. In a globalised world, these efforts will have to be broad-based if they are to be effective.
But this question of what sort of financial regulation we need is very complex. Part of AIG’s problem (part of the reason for the need to rescue AIG) was its exposure to credit default swaps, some of which were designed to help financial institutions limit their credit risks and reduce their needs for capital. Will we really be better off layering regulation of credit default swaps on top of all of the other regulations financial institutions are subject to, as New York is doing?
ny to regulate credit default swaps September 23, 2008
Posted by Bradley in : Uncategorized , comments closedThe Office of the Governor of New York announced yesterday that New York will be regulating credit default swaps which are insurance products (i.e. where the protection buyer owns the underlying asset) from the beginning of next year:
So called “naked swaps”are not insurance and cannot be regulated by the State..
The Circular Letter to which the press release refers is dated September 12.
The move raises the question whether (from a regulatory perspective) it really makes sense to have different treatment of a transaction where the distinguishing criterion is whether it is used as insurance or for speculation.
harmonising short sales rules September 22, 2008
Posted by Bradley in : Uncategorized , comments closedThere’s a new SEC announcement (dated yesterday) on technical amendments to the current short selling rules:
The technical amendments keep in place the exception contained in the original order for short selling related directly to bona fide market making in derivatives in the securities of any Included Financial Firm. However, this exception now requires that, for new positions, a market maker may not sell short if the market maker knows a customer or counterparty is increasing an economic net short position in the shares of the Included Financial Firm.
The technical amendments thus incorporate concepts included in the limitations on increasing net short positions imposed by the U.K. Financial Services Authority (FSA) in its response to short selling. The provisions are not identical because unlike the FSA, the Commission does not have statutory authority over swap contracts and other non-security over-the-counter derivatives.
The technical amendments also provide criteria by which the listing exchanges will select the individual financial institutions with securities covered by the Order. The categories include banks, savings associations, broker-dealers, investment advisers, and insurance companies, whether domestic or foreign, and the owners of any of these entities. Issuers can opt out by notifying the exchange to exclude their securities from the list.
The CESR document noted earlier shows some convergence among market regulators, but this announcement of substantial conformity with the approach of the FSA is quite striking, given that the SEC used to hold itself very much apart from non-US regulators who didn’t know how to do securities regulation. Other regulators are also in the game. See, for example, ASIC’s new rules and guide, and Ontario’s temporary order.
cesr announcement on short selling regulation September 22, 2008
Posted by Bradley in : Uncategorized , comments closedCESR today announced measures taken by various EU securities regulators on short selling. The Euronext regulators are among the most aggressive.
more regulation of short selling September 21, 2008
Posted by Bradley in : Uncategorized , comments closedThe SEC published the following announcement today:
The U.S. Securities and Exchange Commission today approved amendments to its emergency order of September 18 (Release No. 58591) requiring that certain institutional money managers report their new short sales of certain publicly traded securities.
The new rules come into force just after midnight on Monday 22 September.
cesr on the commission's proposals on cras September 19, 2008
Posted by Bradley in : Uncategorized , comments closedCESR’s response to the Commissions proposals on how to deal with the regulation of CRAs tracks pretty well the responses of industry groups I have noted (here and here): In particular, CESR says that the consultation period was too short, and criticises the lack of co-ordination with US regulators and IOSCO:
Credit ratings are essentially an international matter, affecting investors all over the world. Hence, there is a strong need for an internationally harmonised set of requirements. The imposition of stricter requirements on a unilateral basis would seriously jeopardise the significance of the ratings, leading to European vs. International ratings. The efforts to harmonise that have been reached at a global level would also be undermined. Therefore the Committee recommends that before imposing different or additional requirements, efforts should be made to reach agreement with the authorities of other major users of credit ratings. Due process and consultation would then be part of the regulatory procedure.
regulators running scared September 18, 2008
Posted by Bradley in : Uncategorized , comments closedExtraordinary times produce extraordinary regulatory actions. The FSA announced today that:
The Board of the Financial Services Authority (FSA) today (Thursday 18 September) agreed to introduce new provisions to the Code of Market Conduct to prohibit the active creation or increase of net short positions in publicly quoted financial companies from midnight tonight.
The rules will be reviewed after 30 days and will persist until mid-January. The announcement states that detailed changes to the Code of Market Conduct are to be published before the market opens tomorrow. Thus it seems that the regulation is designed to operate (from midnight) before its details are made public (before the market opens tomorrow). The control will apply to short selling with respect to (a list of) financial companies rather than with respect to issuers in general. And it is justified by reference to the need to avoid disorderly markets.
This action is similar to that taken by the SEC in July, although there the order was dated a few days before it took effect (although only published in the Federal register on the date of effectiveness). The SEC yesterday announced its own new emergency rules which took effect at midnight but which are set to expire on October 1 unless extended.
pathways to employment in international law, oct. 21 September 17, 2008
Posted by Bradley in : Uncategorized , comments closedUpcoming Event: The Career Development Office Invites You to Attend Pathways to Employment in International Law
Presented by the American Bar Association and the Florida Bar International Law Sections
This program brings law students together with experienced practitioners to explore opportunities for employment in international law. A distinguished panel will share their experiences to help you:
– Learn about International Internship Opportunities
– Network with legal experts from around the world
– Understand other legal systems and cultures
– Become active in international organizations and societies
– Develop legal and interpersonal skills
Each Pathways panel consists of Section leaders from diverse backgrounds who give advice and guidance on gaining practical experience and improving legal and networking skills, as well as sharing their own paths to careers in International Law.
Details
When: Tuesday, October 21, 2008 at 12:30 p.m.
Where: Student Lounge
RSVP: If you plan to attend, please stop by the CDO and sign up for the panel at the reception desk. Please RSVP by Friday, October 10, 2008.
Reception to Immediately Follow the Program. Refreshments Will Be Served.