This week saw the official launch of a new lobbyist body focused on promoting data transparency within regulatory and government quarters. Dubbed the Data Transparency Coalition (DTC — not to be confused with the other DTC), the group is spearheaded by ex-Securities and Exchange Commission legal eagle and government counsel Hudson Hollister. According to the PR, the group is all for “advocating for common sense initiatives that encourage the productivity and transparency necessary for government reform”; hence, the legal entity identifier (LEI) initiative has been added to the group’s list of objectives. The DTC (no, not that one) is a firm … Continue Reading →

The European Commission is not happy with the Volcker Rule, a provision found in the Dodd-Frank Act  that seeks to limit banks from taking on proprietary trading risks that can imperil client deposits — deposits which in the extreme might require further federal bailouts. The overall intent of the rule is to lower the probability of systemic risk so that banks won’t be able, in effect, to take on risky assets with an implicit federal put. But how can one systematically determine when a transaction is proprietary or market-making for the benefit of customers in nature? King Solomon’s dividing-the-baby dilemma … Continue Reading →

During the early part of December 2011 and per authorization of the Dodd-Frank Act, the Federal Deposit Insurance Corp., the Federal Reserve, and the Office of the Comptroller of the Currency proposed rules that will end the current regime of referencing credit ratings as part of a method of assessing portfolio risk for the purposes of capital retention at large banks. Though this has been much anticipated, extricating credit ratings from bank capital adequacy determinations is but a first step in terms of the financial industry to taking risk matters into its own hands. The change will have significant operational … 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 →

With much fanfare, the supposed bank risk-reduction proposal named after former U.S. Federal Reserve Chairman Paul Volcker has bumped up against market realities. As originally envisioned, this bank regulation was supposed to make proprietary trading a thing of the past (i.e., impermissible for banks to use bank capital to make risky trades on their own behalf). The rationale behind this was that depository institutions that had government-related guaranteed deposits (i.e., FDIC) should not have the ability to take risk positions as principal. The current draft proposal, which has received pushback from Wall Street firms since the Volcker Rule was first … 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 →