aig rescue September 16, 2008
Posted by Bradley in : Uncategorized , comments closedSome firms really are too big to fail. But after years of debate about the Washington consensus, it’s striking to see a US based insurance company acquired by the US Government. The Fed announced a loan of up to $85 billion to AIG:
The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.
fsa international regulatory outlook September 12, 2008
Posted by Bradley in : Uncategorized , comments closedThe FSA published its latest International Regulatory Outlook yesterday. Since April this year the IRO has a new format. The original idea, as described by John Tiner was:
to highlight the range of regulatory issues (by far the majority in the UK’s case) that originate in EU or global fora and to draw attention to the implications of these for regulation in the UK. The impact of such developments will be felt in retail and wholesale markets and by consumers and firms alike. It is important that there is widespread understanding of regulatory developments among the various stakeholders involved to enable them to input their views at an early stage and to plan for implementation….
The FSA is absolutely committed to evidence-based policy making in the UK. We are working in close cooperation with our partners in the Bank of England and H.M. Treasury to promote such principles more broadly within the EU and, in general, to secure proportionate, effective and well thought through financial services regulation here at home. If we are to achieve these aims we need to be able to rely on informed advice and guidance from the regulated community and consumers of financial services and this document is intended to assist in that.
At the end of 2006 the FSA understood that the IROs had been well-received. But in April 2008, the IRO underwent a transition from explaining that a lot of what the FSA does is really driven by developments in Europe (and encouraging UK-based market participants to try to affect what happens in Europe) to an emphasis on presenting the FSA’s strategy with respect to current issues. The aim of encouraging stakeholders to plan for regulatory change remains. The presentation has also changed: the IROs are now shorter documents (from around 60 pages to 18), and the current issue has pictures of (unidentified) buildings, which I suppose are European – the first looks like the Duomo in Florence, but I’m not sure what that has to do with the topic addressed on the page where the picture appears, which is “Evolution or revolution in European financial services regulation?” Topics covered in the current issue are structural issues in transnational financial regulation, including the idea of establishing “colleges” of regulators, and credit rating agencies.
sifma on cras and the eu commission September 8, 2008
Posted by Bradley in : Uncategorized , comments closedSIFMA today (the letter is dated 5 September (the final date for responses), although the press release carries today’s date) joins EACT in critiquing the Commission’s proposals for the regulation of cras. Like EACT, SIFMA is very critical of the consultation timetable:
Given the difficulties posed by this framework, it is disappointing that pressure to regulate should cut short a thorough consultation. Precipitate regulatory action produced by extraneous pressure often produces economic distortions, market inefficiencies, and anti-competitive outcomes. For this reason, few disagree that stakeholders should be consulted with sufficient lead time to take full advantage of their expertise, and to ensure that unforeseen, unintended, or undesirable consequences are identified and mitigated. In this case, the financial services industry has been asked to comment on an extensive regulatory apparatus within four weeks — half the time traditionally allotted. It is worth noting that the US Securities and Exchange Commission (SEC) split its CRA reform proposals into two parts and allowed non-congruent 60 day comment periods. To be sure, CRAs have been the subject of several years of regulatory consultation since the Enron collapse, but that dialogue is of little relevance in the present circumstances. None of the previous consultations envisioned regulation on the scale now proposed, nor gave any indication that such measures were contemplated. We wish, therefore, to share our discomfort with the reduction of a bedrock principle of the EU regulatory process to a near formality.
SIFMA also endorses principles rather than “rigid rules”. And says there’s insufficient attention to the self-regulatory possibilities and to ongoing work in other jurisdictions.
um law seminar on the trial of charles taylor September 4, 2008
Posted by Bradley in : Uncategorized , comments closedTogether with the World Organization for Human Rights, UM Law is hosting a short seminar tomorrow Friday, September 5th from 2:00 — 5:00 p.m. in the Faculty Lounge to discuss the issues in the trial of the son of former Liberian President Charles Taylor taking place in Miami. Prof. Elizabeth Iglesias, Prof. Ricardo Bascuas, Prof. Stephen Schnably, Director Jessica Carvalho Morris and Deputy Director Therese Harris (World Organization for Human Rights USA) will be conducting the seminar.
consultation and retail investors September 4, 2008
Posted by Bradley in : Uncategorized , comments closedIn an apparent contrast to many official consultation exercises on issues of financial regulation, which seem mostly to be concerned with the views of financial firms, Canada’s Joint Standing Committee on Retail Investor Issues has just published a set of questions about product suitability directed to retail investors (with answers due by October 9):
1) What information about an investment does your adviser give you before and after you buy it? Is there any other information you would like?
2) Should specific investment products be prohibited from sale to the public, or should all products be available to investors and investors be allowed to make their own choice?
3) Should regulators focus on regulating specific products or on regulating how products are sold and distributed?
The Chair of the Committee, who is also Vice Chair of the Ontario Securities Commission, said:
This is part of our ongoing commitment to more effectively integrate the retail investor perspective into our regulatory efforts.
It will be interesting to see what sort of response the Committee gets to this consultation.
cras, the commission, and consultation September 3, 2008
Posted by Bradley in : Uncategorized , comments closedEACT, the European Associations of Corporate Treasurers, don’t like the Commission’s proposals for regulating credit rating agencies. EACT have produced a 23 page response to the Commission’s consultation, a consultation period which expires on Friday, and was truncated:
It was not possible for Commission services to start the consultation period earlier given the fact that the advice of the Committee of European Securities Regulators (CESR) and the report of European Securities Markets Expert group (ESME) were delivered only in May and June this year respectively. These contributions had been prepared on the request of the Commission and offered the necessary basis for the Commission services’ work in this area. Moreover, a substantial amount of time in the preparatory phase has been devoted to eventually unsuccessful attempts to create a self-regulatory solution for the CRA industry.
Neither is it possible to extend the consultation period later in September: in view of the forthcoming elections, the European Parliament has agreed with the European Commission to accept the Commission proposals to be dealt in co-decision only by October 2008 at the latest. This implies that the Commission services will need to launch and finalise an Interservice Consultation in September 2008 in order to meet this deadline. Commission services will compensate the short consultation period by individually encouraging important stakeholders (including regulators, Member States and the CRAs) to participate in the public consultation.
I’m not convinced that making sure to encourage the important stakeholders to participate really does compensate for a shortened consultation period (especially one that has taken place while many people have been on vacation, as noted by EACT). And this is yet another consultation exercise which seems to be being carried out only in English. As to the substance, EACT suggests the proposed rules are too detailed (rules-based regulation, rather than principles-based regulation), will impede competition, and risk conflicting with rules being introduced in other jurisdictions.
basle committee and consultation September 1, 2008
Posted by Bradley in : Uncategorized , comments closedIncreased transparency at the Basle Commitee on Banking Supervision, which has published the full text of comments it has received on Principles for Sound Liquidity Risk Management and Supervision (published in June this year). In the past, when it did comment on responses to consultations, the BCBS tended to publicise the gist of comments rather than the full text (for example this overview of comments on sound credit risk assessment and valuation for loans). In publishing the comments on liquidity risk management, the committee stated:
Interested parties were invited to provide written comments by 29 July 2008, with such comments to be published on the Bank for International Settlements’ website unless confidential treatment was requested. As a result, the Committee received 30 comments for publication…
The Committee wishes to thank those who have taken the time and effort to express their views. These comments will no doubt assist the Committee in its efforts to finalise its liquidity guidance.
There are limits to transparency here, however: the BCBS does not state whether or not any respondents made comments which they asked to be kept confidential.
mutual recognition August 25, 2008
Posted by Bradley in : Uncategorized , comments closedThe Australian Government, ASIC and the SEC today announced the signing of a mutual recognition agreement under which each of the two regulators will consider providing exemptions to broker-dealers and exchanges regulated in the other jurisdiction. SIFMA gave the announcement a cautious welcome:
SIFMA will provide more detailed comments on the mutual recognition proposal once the new framework has been analyzed by the industry.
SIFMA has some concern that this initiative might undermine the proposals for a more general relaxation of the conditions under which foreign broker-dealers interact with US persons.
upcoming events at um law August 23, 2008
Posted by Bradley in : Uncategorized , comments closedTuesday, August 26, 2008, 12:30-2:00 p.m.
Alma Jennings Foundation Student Lounge at the Law School
1311 Miller Drive, Coral Gables
Prof. Pedro J. Tenorio Sanchez
Professor on the Law Faculty of the Universidad Complutense de Madrid
Constitución, derechos fundamentals, seguridad y paz: panorama comparativo
(Constitution, fundamental rights, security and peace: a comparative panorama)
Thursday, September 4, 2008, 12:30-2:00 p.m.
Room E352 at the Law School
1311 Miller Drive, Coral Gables
Dr. Francisco Fontecilla
Asesor del Defensor del Pueblo de España (Advisor to the Ombudsman of Spain)
La Corte Penal Internacional
(The International Criminal Court)
litigation and disclosure August 22, 2008
Posted by Bradley in : Uncategorized , comments closedOn the face of it, it would seem that investors might reasonably want to have reliable information about the likelihood that securities issuers would incur significant litigation-related losses. But FASB’s Exposure Draft on Disclosure of Certain Loss Contingencies, which proposes some changes to the current approach to this issue, has been attracting a lot of flak. The big accounting firms don’t seem to like it much. SIFMA’s comment letter on the exposure draft raises some complex issues about the relationship between litigation and disclosure, and clearly shows the influence of the chief counsel and litigation counsel of financial firms (listed in the letter), members of SIFMA’s litigation committee, who were involved in the production of the comment letter. The letter claims to be particularly deserving of notice because the firms represented are both users and producers of financial statements. One concern is that disclosure would interfere with the ability of firms to defend themselves against law suits. Another is the claim that the new approach would weaken attorney-client privilege. But the claim I find most troubling is that litigation outcomes are so unpredictable that more detailed disclosures about litigation contingencies could only be misleading and might be worse than no disclosure at all. The letter makes the practice of law sound like some sort of mysterious and occult endeavor, rather than a professional activity.