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THURSDAY TICKER: 31ST JULY 2014 - Standard & Poor's says Argentina is in selective default on foreign-currency-denominated debt, after the government failed to make a $539m payment on $13bn in restructured bonds. Argentina had transferred the money to the paying agent, but a US judge would not allow its release unless hedge funds holding bonds not included in a restructuring also were paid. The latest default is expected to exacerbate problems in Argentina's recession-hit economy, analysts say. This is the second time Argentina has defaulted on its debt in the last thirteen years, after last-minute talks in New York with a group of bond-holders ended in failure. Vulture fund" investors were demanding a full pay-out of $1.3bn (£766m) on bonds they hold. Argentina has said it cannot afford to do so, and has accused them of using its debt problems to make profits - In a regulatory filing made public earlier this week, and US press reports, BlackRock has begun the process of establishing a Wholly Foreign-Owned Enterprise (WFOE) in Shanghai. The firm is reportedly creating an investment advisory WFOE which will give it significantly greater flexibility and speed in executing its Greater China strategies – Shares in Chinese footwear manufacturer Feike AG have been listed on the General Standard of the Frankfurt Stock Exchange. Ten million shares have been listed at an initial price of €7.50. ACON Aktienbank AG is supporting the issue. Scheich & Partner Börsenmakler GmbH is the specialist. This is the third Chinese company to list on the exchange according to managing director Michael Krogmann. “With the IPO we have achieved an important strategic milestone. This helps us to expand our competitive position and our brand awareness in the booming Chinese market for children’s footwear as well as to realise future growth plans”, says Andy Hock Sim Liew, CFO of Feike AG - Funding pressures stemming from reduced central government capital grants and the persistence of tightened long-term bank lending are likely to fuel the English housing association sector's continued use of capital markets over the next two years, says Moody's Investors Service in a new report published today. The new report English Housing Associations: Financial Disintermediation- A One Way Trip, is the third in a series on European sub-sovereigns' financing needs and access to market funding.

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Regulatory Update

Traders Beware, Focus Could Shift Quickly in Your Direction

Monday, 16 July 2012 Written by 
Traders Beware, Focus Could Shift Quickly in Your Direction Some unsettling stories continue to unfold. One is Peregrine Financial Group, which managed to combine some of the most memorable red flags of the Madoff and MF Global scandals without attracting a regulatory response from the CFTC. (PFG represented that it held more than $220 million of customer funds when in reality it held approximately $5.1 million.) http://www.ftseglobalmarkets.com/

Some unsettling stories continue to unfold.

One is Peregrine Financial Group, which managed to combine some of the most memorable red flags of the Madoff and MF Global scandals without attracting a regulatory response from the CFTC. (PFG represented that it held more than $220 million of customer funds when in reality it held approximately $5.1 million.)

The second involved information stemming from the Barclay’s Libor scandal—in particular, exactly how much was known, when, and by what regulators.  The NY Fed, confirming that it received reports about Libor issues in 2007 and 2008, on Friday released documents showing it took “prompt action four years ago to highlight problems.”  The actions of Treasury Secretary Timothy Geithner, who headed the New York Fed from 2003 until 2009, may be heavily scrutinized.  So will those of the U.K. authorities.

And then there is the recent announcement by JPMorgan of possible valuation discrepancies by its traders. According to JPMorgan’s chief financial officer, a restatement may be necessary based upon facts uncovered “regarding the CIO traders’ intent as they were marking the book. And as a result, we questioned the integrity of those trader marks.”

What impact will this have on the regulatory climate?  Clearly, the regulators will be under tremendous pressure.  Richard Shelby, the top Republican on the U.S. Senate Banking Committee, noted Peregrine “raises serious questions about our current regulators and whether they are capable of doing their jobs.”  Others are also voicing concerns.  In turn, the regulators are likely to respond by increasing their oversight.

And as they do so, traders in particular may be in the line of fire.  Reflecting on LIBOR, Warren Buffett is quoted as saying, “the idea that a bunch of traders can start e-mailing each other . . . and play around with . . . [the Libor] rate . . . is not good for the system.”  This is the type of concern that prompted the CFTC this past April to pass rules for swap participants, which basically wall off traders from the rest of the firm.  Traders cannot supervise or influence the compensation of research analysts or clearing unit employees.  In some cases, communications with traders are prohibited unless the communication is made through the firm’s compliance department.  Both the Libor scandal and the J.P. Morgan trading loss, coupled perhaps with a few new situations brewing in the background, might give this type of thinking a major boost.

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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