Sunday 25th January 2015
FRIDAY, JANUARY 23RD 2015: European markets regulator ESMA has added Athens Exchange Clearing House to its list of authorised CCPs under the European Market Infrastructure Regulation (EMIR). EMIR requires EU-based CCPs to be authorised and non-EU CCPs to be recognised in the European Union (EU). The updated list of authorised CCPs is available on ESMA's website - Driven by strengthening private domestic demand, economic growth in the US is expected to accelerate modestly this year and drag last year’s unspectacular housing activity upward, according to Fannie Mae’s Economic & Strategic Research (ESR) Group. Amid continued low gasoline prices, a firming labour market conditions, rising household net worth, improving consumer and business confidence, and reduced fiscal headwinds, the economy is expected to climb to 3.1% in 2015, up from the Group’s estimate of 2.7% in the prior forecast. The stronger economic backdrop should lead to improving income prospects, underpinning a higher rate of household formation in 2015. "Our theme for the year, Economy Drags Housing Upward, implies that both housing and the economy will pick up some speed in 2015, but that the economy will grow at a faster pace," says Fannie Mae chief economist Doug Duncan. "We have revised upward our full-year economic growth forecast to 3.1% for 2015, which is not yet robust but still an improvement over last year’s growth. Consumer spending should continue to strengthen due in large part to lower gas prices, giving further support to auto sales and manufacturing. We believe this will motivate the Federal Reserve to begin measures to normalize monetary policy in the third quarter of this year, continuing at a cautiously steady pace into 2016 and 2017, likely keeping interest rates relatively low for some time." - The Russian Central bank said yesterday that its gold reserves grew by a 600,000 ounces (18.7 tonnes) in December – the ninth successive month of gold reserve increases. Russia has now more than tripled its gold reserves in the past ten years. The ruble has fallen in value by almost 50% in the past 12 months which makes the nation’s gold reserves ever more important to its global economic status – According to LuxCSD the Taiwan Depository and Clearing Corporation (TDCC) has announced, effective Sunday (January 25th) the firm’s BIC will change from TDCCTWT1 to TDCCTWTP. Customers should quote the TDCC's new BIC in field 95P::PSET//TDCCTWTP of their settlement instructions – Moody's today upgraded the Corporate Family Rating (CFR) of Stabilus S.A. to B1 from B2 and the Probability of Default Rating (PDR) to B1-PD from B2-PD. At the same time the rating agency upgraded the instrument ratings assigned to the Senior Secured Notes issued by Servus Luxembourg Holding S.C.A. to B1 from B2. The outlook on all ratings remains positive – The US Federal Reserve Bank of New York says its daily Fed Funds effective rate is now 0.12% (Low 0.30%, High 0.3125%) with four basis points of standard deviation - Vanguard Group, already the biggest mutual fund company in the world, has risen to second place as a provider of exchange-traded funds, says ETF.com—based on the success of its low-cost index funds, including ETFs. Boston-based State Street Global Advisors, has dropped from second to third. Even so, SSGA still has the largest ETF in the world, the SPDR S&P 500 ETF (SPY | A-98) - The Straits Times Index (STI) ended +41.21 points higher or +1.22% to 3411.5, taking the year-to-date performance to +1.38%. The FTSE ST Mid Cap Index gained +0.97% while the FTSE ST Small Cap Index gained +0.23%. The top active stocks were CapitaLand (+4.09%), DBS (+0.80%), SingTel (+0.76%), UOB (+0.72%) and Noble (-0.47%). The outperforming sectors today were represented by the FTSE ST Real Estate Holding and Development Index (+2.31%). The two biggest stocks of the FTSE ST Real Estate Holding and Development Index are Hongkong Land Holdings (+1.18%) and Global Logistic Properties (+1.57%). The underperforming sector was the FTSE ST Oil & Gas Index, which gained +0.16% with Keppel Corp’s share price unchanged and Sembcorp Industries’s share price declining +0.93%. The three most active Exchange Traded Funds (ETFs) by value today were the SPDR Gold Shares (+0.77%), IS MSCI India (+1.89%), DBXT MSCI Asia Ex Japan ETF (+1.57%) –

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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