Wednesday 1st April 2015
NEWS TICKER: TUESDAY MARCH 31st 2015 : Following a recent Morningstar Analyst Ratings Meeting, Morningstar has downgraded the Artemis UK Smaller Companies fund to a Morningstar Analyst Rating™ of Silver. The fund previously held a Gold rating. Morningstar continues to believe the experienced manager and robust process make this a strong choice for UK small-cap exposure, but Morningstar feels a Silver rating provides a better reflection of the fund’s relative merits within the sector. Indeed, given the manager’s focus on high-quality companies with resilient business models, Morningstar would have expected the fund to protect investors’ capital in 2014 to a greater extent than it did; an outcome which has slightly dented Morningstar’s conviction in the manager’s application of his process - President of the European Council Donald Tusk’s meeting with Prime Minister of Spain Mariano Rajoy today covered many points, but concern over a lack of government in Libya and the causes and consequences of instability and insecurity in the Southern Neighbourhood took up much of the discussion. “The Prime Minister and I had a very open discussion on both the causes and consequences of instability and insecurity in the Southern Neighbourhood. We had a good exchange on what the European Union is already doing - in terms of assistance, counter-terrorism and migration - and how we can better target our efforts to make a real difference,” notes Tusk in a briefing note issued today - Data published today by the Association of Investment Companies (AIC) using Matrix Financial Clarity suggests that investment company total purchases on platforms by advisers and wealth managers were 19% higher least year (with purchases worth £452.7m) and more than double the figure in 2012. In Q4 2014, platform purchases of investment companies were at £110.3m, 10% higher than purchases of £100.3m in Q4 2013 and 90% higher than purchases of £58.1m in Q4 2012. Investment company purchases at £110.3m in Q4 2014 were stable when compared to £110.6m in Q3 2014. Whilst 2014 was a strong year for purchases there was also a significant increase in sales, which rose 40% to £290.9m compared to £208.4m in 2013, suggesting some advisers and wealth managers are taking profits and rebalancing portfolios. Ian Sayers, Chief Executive, AIC, said: “Though sales have increased, we should remember that this trading activity all helps to improve liquidity. The AIC has trained over 3,000 advisers in response to RDR, and has recently increased its resource in this area, with the recruitment of Nick Britton, the AIC’s Head of Training. This will help us to increase awareness and understanding of investment companies with a refreshed training programme and the capability to meet and support more advisers.” The Global and UK Equity Income sectors were the most popular for advisers and wealth managers in 2014 overall, accounting for 18% and 13% of purchases respectively. The Infrastructure and Property Direct – UK were the third and fourth most popular sectors over 2014, accounting for 8% and 7% of purchases respectively. Transact and Ascentric continue to be the top platforms for investment company purchases, accounting for 49% and 20% of the market respectively in 2014. Alliance Trust Savings are increasing in popularity with financial advisers, their market share increasing to 18% in 2014 from 12% in 2013 - The Straits Times Index (STI) ended -7.25 points lower or -0.21% to 3447.01, taking the year-to-date performance to +2.43%. The FTSE ST Mid Cap Index declined -0.17% while the FTSE ST Small Cap Index declined -0.24%. The top active stocks were SingTel (+0.46%), DBS (-0.10%), UOB (-0.99%), Global Logistic (+0.38%) and OCBC Bank (-0.75%). The outperforming sectors today were represented by the FTSE ST Technology Index (+1.08%). The two biggest stocks of the FTSE ST Technology Index are Silverlake Axis (+1.86%) and STATS ChipPAC (unchanged). The underperforming sector was the FTSE ST Basic Materials Index, which declined -1.88% with Midas Holdings’ share price declining -3.23% and Geo Energy Resources’ share price declining -0.52%. The three most active Exchange Traded Funds (ETFs) by value today were the IS MSCI India (+0.13%), DBXT MSCI China TRN ETF (+1.25%), DBXT FT China 25 ETF (+0.28%). The three most active Real Estate Investment Trusts (REITs) by value were CapitaMall Trust (+0.92%), Ascendas REIT (+1.17%), Suntec REIT (-1.07%). The most active index warrants by value today were HSI25000MBeCW150429 (+6.12%), HSI24800MBeCW150528 (+5.80%), HSI24000MBePW150528 (-7.32%) - Mississippi’s Rankin County School District has issued an online survey meant to gauge public opinion of a potential bond issue to build new classrooms. The bond issue would be used for construction of new instructional facilities, and school board officials have been discussing the possibility for a while. No specific details of the amount or number of facilities have been released, but school board Vice President Ann Sturdivant said district personnel are working to assess the needs. Rankin voters rejected a $169.5m bond issue in 2011 to upgrade and build new classrooms, but Sturdivant said she believes people see the need to remedy overcrowding issues, particularly in the Florence, Brandon and Northwest zones and that tapping the US debt capital markets will be a logical step -

Blog

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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