The Investment Industry Regulatory Organization of Canada (IIROC) recently approved amendments to the Universal Market Integrity Rules (UMIR) pertaining to short sales. The following changes will become effective on September 1, 2012: The new rules repeal the “tick test” — a test that prohibits short sales at a price lower than the last sale price of a security. IIROC decided against implementing a circuit breaker like the SEC’s Rule 201. It should be noted, however, that IIROC has since 2008 had the authority (not yet exercised) to designate “short sale ineligible securities.” In addition, IIROC can trigger single-stock circuit breakers that halt trading for a … Continue Reading →

Last week, the Canadian Securities Administrators (CSA) opened for comment the latest in its series of consultation papers on the regulation of over-the-counter (OTC) derivatives. CP 91-404 explores issues, considers alternative solutions, and sets out proposals for the segregation and portability of customer accounts and collateral associated with OTC derivatives transactions cleared through a central counterparty (CCP). The protection of customers’ collateral is an important topic; indeed, Aite Group wrote about account segregation (as well as CCPs) in Top 10 Trends in Institutional Securities & Investments, 2012. We have come to expect the CSA’s Derivatives Committee to explain complex matters clearly and develop regulatory … Continue Reading →

Chaired by Timothy Geithner, the public portion of an October 11 meeting of the Financial Stability Oversight Council (FSOC) was brief and largely ceremonial. The Treasury Department’s Lance Auer, deputy assistant secretary for financial institutions, summarized the proposed process by which nonbank financial institutions will be designated “systemically important” and, consequently, become subject to additional supervision and prudential standards. Mary Schapiro, Ben Bernanke, and acting FDIC chairman Martin Gruenberg gave short, anodyne statements pointing out the need for further work related to private funds, asset management firms, and resolution planning. The council then voted in favor of releasing for public comment a … Continue Reading →

On September 13, the U.S. House Capital Markets Subcommittee held a hearing on two SEC studies and related proposals. Both studies were mandated by the Dodd-Frank Act: Section 913 calls for a review of the standard of care for investment advisers and broker-dealers providing personalized investment advice, and Section 914 requires an examination of the need for enhanced examination and enforcement resources for investment advisers, including dually registered broker-dealers and investment advisers. In connection with the latter, the subcommittee also considered legislation drafted by Rep. Spencer Bachus under the short title, “Investment Adviser Oversight Act of 2011.” It was a full … Continue Reading →

This Friday — August 12, 2011 — the Dodd-Frank whistleblower provisions take effect. Introducing financial inducements into prospective informants’ complex, emotionally fraught decision process may subtly alter compliance departments’ relationships with employees and regulators. Importantly, the rules do not require employees to follow their firms’ internal compliance procedures before advising the Securities and Exchange Commission (SEC) about possible securities law violations. If internal reporting were mandatory, individuals in possession of what the SEC calls “quality tips” might well choose to remain silent for a variety of reasons. They might, for instance, mistrust the compliance managers’ confidentiality, doubt their effectiveness, or … Continue Reading →

Taxes, entitlements, and the national debt limit are not the only controversial topics in Washington this summer. The Securities and Exchange Commission’s proposal to apply a uniform fiduciary standard to investment advisers and broker-dealers alike has created a ruckus in the retail investment industry. The Securities Industry and Financial Markets Association (SIFMA) and the National Association of Insurance and Financial Advisers (NAIFA) are lobbying vigorously against the SEC proposal.* What’s behind this brouhaha?  We are not qualified to offer legal advice, but here is a layman’s account. As with so many other regulatory issues these days, the debate originated with the Dodd-Frank … Continue Reading →