Saturday 18th April 2015
NEWS TICKER FRIDAY APRIL 17TH 2015: -On June 9, 2015, the Federal Trade Commission will host a workshop to examine competition, consumer protection, and economic issues raised by the proliferation of online and mobile peer-to peer business platforms in certain sectors of the economy, often referred to as the “sharing economy.” The workshop will take place in Washington, D.C., at the FTC’s Constitution Center conference space. Peer-to-peer platforms, which enable suppliers and consumers to connect and do business, have led to the emergence of new business models in industries that have been subject to regulation. The FTC’s sharing economy workshop will explore how regulatory frameworks can accommodate new sharing economy business models while maintaining appropriate consumer protections and a competitive marketplace. “We are seeing a dramatic growth in products and services that are built on peer-to-peer platforms, such as ride-sharing and property rentals, as more entrepreneurs harness the power of technology to reach more consumers,” says FTC Chairwoman Edith Ramirez. “The resulting business models have great potential to benefit our economy and consumers. Through our workshop, we want to better understand the competitive impact of these new business models, as well as their interactions with existing regulatory frameworks.” - he Straits Times Index (STI) ended 6.42 points or 0.18% lower to 3525.19, taking the year-to-date performance to +4.76%. The top active stocks today were Keppel Corp, which declined 2.01%, DBS, which gained 0.91%, SingTel, which gained 0.23%, UOB, which gained 0.38% and ComfortDelGro, with a 1.70% advance. The FTSE ST Mid Cap Index fell 0.30%, while the FTSE ST Small Cap Index rose 0.06%. The outperforming sectors today were represented by the FTSE ST Utilities Index, which rose 1.60%. The two biggest stocks of the Index - United Envirotech and Hyflux – ended 5.12% higher and 2.09% lower respectively. The underperforming sector was the FTSE ST Basic Materials Index, which slipped 1.82%. Midas Holdings shares declined 2.56% and Geo Energy Resources remained unchanged - It has been a testing day in the markets, with most stock markets reporting substantial losses. The spectre of another crisis in Greece as the IMF talked tough on the country adhering to its repayment schedule, a terminal outage at Bloomberg and a clampdown on OTC and short selling in China combined to test investor sentiment. The FTSE 100, fell briefly below 7000 to end up finding support at 7007; however Spain's Ibex and Italy's FTSE MIB were both 2% down while the German DAX 30 slid 1.8% and France's CAC 40 fell 1.2% - The outage impacted the UK DMO’s offer of £300m 1 month bill, due 18-May-2015(ISIN GB00BDNKWT09); the £1,000m 3-months bill due 20-Jul-2015 (ISIN GB00BDNLZ833), and the £1,500m 6-months bill due 19-Oct-2015 (ISIN GB00BDNNDG38) was conducted between midday and14.30 today. Any bids submitted in the aborted operation earlier this morning were deemed null and void - Catastrophe bond issuance is forecast to have risen almost 30% so far this year, though the size of the market remains modest. The increase in demand for cat bonds means that some bonds are now trading at a discount to their original issue price for the first time in years. Issuance for the year through to mid-April is predicted to be up 27% on 2014, at around $2.1bn, The full-year trend also looks positive, following on from a record cat bond issuance of $8.4bn in 2014 - Moody's Investors Service has described in detail the approach it takes to allocating expected credit losses across the various classes of debt issued by banks in the US, the EU and Switzerland. The liability hierarchy or "waterfall" that Moody's employs to allocate estimated losses to debt classes in these three jurisdictions incorporates the implications of key structural differences in their bank resolution and bail-in frameworks. In this way, the liability hierarchy aims to capture the prioritisation authorities will give different debt classes when apportioning losses to creditors in the event of a bank's failure. The construction of a given bank's liability structure at failure serves as the starting point of Moody's Loss Given Failure (LGF) analysis, instituted as part of its new bank rating methodology. The LGF framework is used to assess and differentiate creditor risk across banks' liability structures, as detailed in Moody's report "How Resolution Frameworks Drive Our Creditor Hierarchies." The bank resolution and bail-in frameworks in the US, EU, and Switzerland all aim to limit the use of public funds in bank resolutions while mitigating risks to financial stability. Important differences in these frameworks include the degree of power authorities have to write down or convert capital instruments, differences in depositor preference, and variations in the obligations of holding companies to their operating companies - Close Brothers has reportedly acquired advisory firm Mackay Stewart & Brown for an undisclosed amount. Andy Cumming, head of advice at Close Brothers Asset Management, said the acquisition would strengthen the national advice firm’s Scottish operation.

Blog

Regulatory Update

Protect Your Firm... And Your Personal Assets!

Monday, 30 July 2012 Written by 
Protect Your Firm... And Your Personal Assets! Hoping for a respite from regulatory change?  Think again.  Gathering forces may create a regulatory storm that is even more difficult than the one faced in the 2007-2009 financial crisis.  In this tempest, both the regulated and the regulators will have bull’s-eyes on their backs.  Regulators are likely to become more conservative in their analysis and more active.  It is therefore imperative to assess your firm now and prepare yourself to withstand regulatory inquiries.  You can also expect more scrutiny from investors who will seek to allocate funds only to those firms that they believe are fully complying with applicable laws and regulations. http://www.ftseglobalmarkets.com/

Hoping for a respite from regulatory change?  Think again.  Gathering forces may create a regulatory storm that is even more difficult than the one faced in the 2007-2009 financial crisis.  In this tempest, both the regulated and the regulators will have bull’s-eyes on their backs.  Regulators are likely to become more conservative in their analysis and more active.  It is therefore imperative to assess your firm now and prepare yourself to withstand regulatory inquiries.  You can also expect more scrutiny from investors who will seek to allocate funds only to those firms that they believe are fully complying with applicable laws and regulations.

What fuels this gathering storm?  Outright major misappropriations by the likes of Madoff and Peregrine's Wasendorf are part of the equation.  In addition, events such as the LIBOR-fixing scandal at Barclays, J.P. Morgan’s “London Whale” trading losses, and MF Global’s failure to segregate customer funds serve as cautionary examples.

These stories highlight that a firm’s assets, reputation, and in some cases, even the firm’s fundamental viability are at stake when things go awry.  As if that weren’t bad enough, senior executives face additional consequences.  In these and other similar incidents, personal assets can be at stake even when others are the primary wrongdoers.  



Think you are immune from these risks?  Think again.  Labaton Sucharow LLP, a plaintiff's law firm, recently published a unsettling study indicating that one in four financial industry professionals in the U.S. and U.K. believe wrongdoing is necessary for success.  If this study is credible, the message it sends to the general public is highly negative.  It speaks to senior management of alternative investment firms loud and clear: sometimes the best-intentioned executive may have an employee who hears an "unintended message" and veers off course.  Intended or not, the executive may ultimately bear responsibility. 

The first line of defense for an investment advisory firm and its executives is to build a culture in which the firm’s standards clearly and consistently meet all applicable regulatory and ethical expectations.  It is particularly important for firm leaders to reaffirm these standards and expectations during times of economic and operational stress, when legal and internal requirements may appear to conflict with business drivers (such as maximizing short-term results).  Employees must internalize that senior management will take the ethical route in order to maximize the long-term value of the firm—and expects them to do the same.

The second line of defense, at least in the U.S., is to develop a governance structure that satisfies the requirements specified in the U.S. Attorneys’ Manual.  This manual offers incentives to companies that adopt a comprehensive compliance and ethics program (and take certain actions upon the occurrence of alleged missteps).  A program that satisfies these requirements will contain elements in addition to those required by the SEC and CFTC.  Complying with the U.S. Attorneys’ Manual can be an invaluable safeguard that reduces the likelihood of an executive or his firm being charged with criminal violations.

The third line of defense is to undertake an honest self-assessment, and to consider the types of pressures that senior management and employees will encounter should the weakened state of the global economy continue.  Topics in the regulatory spotlight should be included in this assessment.  The intent here is to prepare for the possible pressures employees and senior management might face, thereby reducing the chance that hasty decisions are made in the heat of the moment. Ill-considered actions can carry serious penalties and act as a lightning rod for litigation by regulators, investors, and other third parties (such as credit providers).  Advance preparation will help your staff make faster and better decisions if the need should arise. 

You can't always remove that bull’s-eye on your back, but you can at least make the target less bright.

Deborah Prutzman

Deborah Prutzman is the founder and CEO of The Regulatory Fundamentals Group (RFG), a New York-based firm that designs and implements business and risk solutions for alternative asset managers and institutional investors. RFG's senior-led team employs a robust suite of tools, including practical alerts on new and potential industry developments and its powerful RFG Pathfinder® knowledge management platform which simplifies the challenges of operating in a regulated environment.  To learn more about The Regulatory Fundamentals Group call (212) 537-4058, email a representative at Information@RegFG.com or visit RegFG.com

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