self-regulation May 24, 2008
Posted by Bradley in : Uncategorized , comments closedThe last few weeks I have been spending a lot of time in meetings, participating in law school/university self-regulation. Meanwhile I have been working on a paper with the title Reconfigured Selves in Self-Regulation, which I am going to talk about at the Law and Society Association conference next week in Montreal. The aim of the paper is to look at who the selves are in financial self-regulation and to argue that they are much more complicated than we typically think they are.
transatlantic financial regulation May 14, 2008
Posted by Bradley in : Uncategorized , comments closedFrom the Transatlantic Economic Council:
The European Commission will propose a positive decision on the equivalence of US accounting standards (GAAP) to EU rules in the course of 2008;
Work on mutual recognition in securities regulation has intensified and the EU and SEC will define a process for carrying out comparability assessments of their securities regimes later this year. The TEC also encourages the implementation of other approaches to facilitate cross-border financial services, such as providing relief from local licensing requirements for securities firms engaging in cross-border business with certain sophisticated investors;
We have urged our financial markets regulators to make significant strides by the end of 2008 to identify the steps that need to be taken to create a true level playing-field for EU and US insurance companies in each other’s jurisdiction
SIFMA took the opportunity to urge the SEC to work harder on achieving part of this agenda:
SIFMA is extremely disappointed to note that the SEC has been letting valuable time pass without proposing anticipated changes to the 19 year-old Securities Exchange Act Rule 15a-6. Reforming this rule would implement one of the TEC’s stated commitments and would eliminate existing inefficiencies, increase investment opportunities, improve competition, without damaging investor protection,”said David Strongin, managing director of SIFMA.
call for experts in financial education May 14, 2008
Posted by Bradley in : Uncategorized , comments closedThe EU Commission today published a call for applications for membership of its Expert Group on Financial Education, established by a Commission Decision of 30 April. Applications are due by June 13, 2008 and the call states:
The Commission will take the following criteria into account when assessing applications:
1) Proven knowledge and expertise in current financial literacy issues;
2) Recent practical experience, including at European or international level, in the area of financial education;
3) The ability of the individual expert to define and shape the views of various stakeholder communities in respect of the matters covered by the mandate;
4) The need to strike a balance within the group of experts in terms of representativeness of applicants, gender and geographical origin
Members of the group of experts must be nationals of a Member State of the European Union.
risk-based loan pricing May 12, 2008
Posted by Bradley in : Uncategorized , comments closedWhat could be complicated about ensuring that borrowers are provided with a notice when the pricing of their loans is less favorable than the pricing of loans to other borrowers (a requirement in the FACT Act amendments to the Fair Credit Reporting Act) ? Well, Calculated Risk explains here how complicated risk-based pricing is. And the FTC and Federal Reserve have just published proposed rules to implement the statutory requirement. When they began looking into this issue by conducting outreach with various stakeholders, the agencies found that:
it may not be operationally feasible in many cases for creditors to compare the terms offered to each consumer with the terms offered to other consumers to whom the creditor has extended credit. After considering several approaches, the Agencies concluded that the most effective way to implement the statute was to develop certain tests that could serve as proxies for comparing the terms offered to different consumers. These tests could be used by creditors for which making direct comparisons among consumers would be difficult or infeasible.”
There is some recognition in the proposal that definitions may need to change if creditors’ practices change – the definition of material terms refers to the APR on the basis that risk-based pricing affects the APR (and partly because that is what consumers look to). If risk were reflected in other terms, the definition would need to change. The agencies seek input on the definition of material terms and on how to deal with the problem of comparing credits with multiple variables.
In a long and complex document, the FTC and Fed seem to have ducked some of the issues in ways that may not make the notice requirement very meaningful. For example:
The proposed rules do not define what constitutes “a substantial proportion”of consumers, even though that concept is integrally linked to the concept of “materially less favorable”terms under the statute. The Agencies have not identified a definition of “a substantial proportion”that could reflect the widely varying pricing practices of creditors generally.
The definition of what is “materially less favorable” is a bit fuzzy and involves consideration of factors including:
the type of credit product, the term of the credit extension, if any, and the extent of the difference between the material terms granted or extended to the two consumers.
Creditors can choose among different methods for comparing customers, and for providing the disclosures, including something that sounds a lot like a rather generic description of the creditor’s risk-based pricing systems. And the “notice” may be oral. The obligation applies only to the creditor, rather than to an intermediary, so if a mortgage broker uses a borrower’s credit score in determining where to look for credit, the borrower won’t receive a notice with respect to this.
Last week the Shadow Financial Regulatory Committee (see Statement No. 260) argued for removing responsibilities for consumer protection from the Fed, because these responsibilities make the Fed more “enmeshed in politics ” than it should be.
consumer financial decision-making May 11, 2008
Posted by Bradley in : Uncategorized , comments closedAs the Florida lottery invites its customers to pay out even more money (in a recession) for a very very tiny chance of a bigger jackpot, Capital One wants its customers to get very friendly with their credit cards by putting their own pictures on the cards. Probably they don’t want consumers to decorate their cards with warnings to spend less money – it seems they want pictures which will give customers warm and fuzzy feelings every time they take out the cards.
happy europe day May 9, 2008
Posted by Bradley in : Uncategorized , comments closedMay 9 is Europe day commemorating the Schuman declaration.
retail financial services April 30, 2008
Posted by Bradley in : Uncategorized , comments closedRecent developments in thinking about retail financial services: the Joint Forum published a paper on customer suitability in the retail sale of financial products and services, stating:
concerns about the impact of mis-selling are arguably an area where concerns about system stability and investor protection meet.
And the UK’s FSA published the interim report for its Retail Distribution Review:
The aim of the RDR is for more consumers to have sufficient confidence in the market to want to use its products and services more often. To achieve this, we need an industry that more clearly acts in the best interests of its customers and treats them fairly.
bartle and the politics of regulating games April 29, 2008
Posted by Bradley in : Uncategorized , comments closedJust after the Commission’s decision to focus on online games, Richard Bartle (writes in the Guardian) suggesting that the political paranoia about computer games is time limited as gamers age:
Gamers vote. Gamers buy newspapers. They won’t vote for you, or buy your newspapers, if you trash their entertainment with your ignorant ravings. Call them social inadequates if you like, but when they have more friends in World of Warcraft than you have in your entire sad little booze-oriented culture of a real life, the most you’ll get from them is pity.
eu commission and on-line games April 25, 2008
Posted by Bradley in : Uncategorized , comments closedThe Commission is concerned about the (lack of) regulation of online video games in the EU:
Overall, the Commission considers that additional efforts are needed with regard to on-line videogames, in order to take account of their specificities: a swift and effective mechanism for age verification is needed, and particular attention should be paid to chat rooms. A pan-European dialogue between all stakeholders would be useful in this respect.
In this context, the EU policy to reinforce public-private cooperation against cyber crime, and in particular against illegal and harmful content on the Internet, may serve as a starting point.
transparency of comments on proposed regulation April 24, 2008
Posted by Bradley in : Uncategorized , comments closedOn reading the LIBA-SIFMA response to the FSA’s January 2008 Discussion Paper on a Review of the Structure of the Listing Regime I thought it would be interesting to see what other organizations had expressed views on the DP and what those views were. If this were a regulatory proposal published by the SEC I’d be able to look on the SEC’s website for comments. For example, here are comments on the recent naked short selling anti-fraud proposal. But the FSA produces response papers analysing the various responses rather than publishing them itself. Trade associations do publish their responses on their own websites, so it is possible to find them, at least in some cases, but relying on commenters to make their comments available produces a less transparent process than if the regulator makes all comments on a particular proposal available in one place.
I often think the FSA makes more effort to consider the interests of financial services consumers than CESR, but here is one example where that is not the case as CESR does itself publish the comments it receives on its own initiatives. In some ways, having the FSA analyse and summarise the responses is helpful (see for example this document on responses relating to private equity) but it would be nice for transparency to have easy and immediate access to comments as they are being made (as is the case with the SEC) as well.