CFTC overhauls customer protection requirements

2014 ◽  
Vol 15 (1) ◽  
pp. 25-32 ◽  
Author(s):  
Robert M. Brown
Keyword(s):  
Design Methodology ◽  
Commodity Futures ◽  
Regulatory Regime ◽  
Futures Trading ◽  
Content Type ◽  
Regulatory Response ◽  
Market Participants ◽  
Policies And Procedures ◽  
Practical Implications

Purpose – The purpose of the paper is to summarize the Commodity Futures Trading Commission's (CFTC) recent overhaul of its customer protection rules, which regulate how futures commission merchants (FCMs) and derivatives clearing organizations (DCOs) handle customer funds. Design/methodology/approach – The paper summarizes the most significant aspects of the CFTC's October 30, 2013 customer protection rulemaking, explains FCM and DCO obligations under the new regulatory regime, and sets forth a compliance timeline. Findings – The CFTC's recent overhaul of its customer protection rules impose significant new requirements on FCMs and DCOs in their handling of customer funds. Practical implications – All FCMs and DCOs that handle customer funds should review these new rules and begin putting into place policies and procedures to ensure their compliance as each new requirement comes into effect. Originality/value – The CFTC's overhaul of its customer protection regime is new and significant. FCMs and DCOs need to understand their new obligations under the rules. As these new rules are the CFTC's regulatory response to the events that led to the insolvencies of MF Global and Peregrine Financial Group, these developments also should be of interest to futures and swaps market participants generally.

ESMA issues Brexit opinions to EU regulators: a warning shot not only to the UK but also to the EU27

2017 ◽  
Vol 18 (4) ◽  
pp. 50-52
Author(s):  
William Yonge ◽  
Simon Currie
Keyword(s):  
Financial Services ◽  
Design Methodology ◽  
Content Type ◽  
Regulatory Response ◽  
Market Participants ◽  
Financial Firms ◽  
Practical Guidance ◽  
The Uk ◽  
Practical Implications ◽  
The Eu

Purpose To summarize and analyse four opinions issued in May and July 2017 by the European Securities and Markets Authority (“ESMA”) concerning regulatory and supervisory arbitrage risks that arise as a result of increased requests from financial market participants to relocate activities and functions in the EU27 following the UK’s decision to withdraw from the EU, and the expected regulatory response to those risks. Design/methodology/approach Discusses the possible relocation of financial firms, activities and functions following the UK’s decision to withdraw from EU; the resulting cross-sectoral regulatory and supervisory arbitrage risks that ESMA foresees; nine principles that ESMA enumerates to guide its regulatory response to those risks; some common themes that emerge from ESMA’s July Opinions; and the implications for UK firms and trading venues seeking to establish a presence in the EU 27. Findings ESMA foresees regulatory and arbitrage risks in Brexit and a potential “race to the bottom” as certain national regulators jostle for and grab UK market share. Practical implications UK firms and trading venues seeking to establish a presence in the EU27 from which to operate will need to give detailed consideration and focus to the resources and operational substance which will need to be located in the jurisdiction in which that presence is established. Originality/value Practical guidance from experienced financial services, securities and fund management lawyers.

OCIE issues risk alert on the most frequently identified advisory fee and expense compliance issues

2018 ◽  
Vol 19 (4) ◽  
pp. 1-3
Author(s):  
Robert Van Grover
Keyword(s):  
Design Methodology ◽  
Best Practice ◽  
Investment Management ◽  
Content Type ◽  
Informed Decisions ◽  
Policies And Procedures ◽  
The Us ◽  
Investment Advisers ◽  
Practical Implications

Purpose To summarize and interpret a Risk Alert issued on April 12, 2018 by the US SEC’s Office of Compliance Inspections and Examinations (OCIE) on the most frequent advisory fee and expense compliance issues identified in recent examinations of investment advisers. Design/methodology/approach Summarizes deficiencies identified by the OCIE staff pertaining to advisory fees and expenses in the following categories: fee billing based on incorrect account valuations, billing fees in advance or with improper frequency, applying incorrect fee rates, omitting rebates and applying discounts incorrectly, disclosure issues involving advisory fees, and adviser expense misallocations. Findings In the Risk Alert, OCIE staff emphasized the importance of disclosures regarding advisory fees and expenses to the ability of clients to make informed decisions, including whether or not to engage or retain an adviser. Practical implications In light of the issues identified in the Risk Alert, advisers should assess the accuracy of disclosures and adequacy of policies and procedures regarding advisory fee billing and expenses. As a matter of best practice, advisers should implement periodic forensic reviews of billing practices to identify and correct issues relating to fee billing and expenses. Originality/value Expert guidance from experienced investment management lawyer.

SFC reminding sponsors of the need to adopt an attitude of “professional scepticism”

2017 ◽  
Vol 18 (3) ◽  
pp. 82-84
Author(s):  
Gareth Hughes ◽  
James Comber
Keyword(s):  
Hong Kong ◽  
Design Methodology ◽  
Regulatory Regime ◽  
Group Company ◽  
Content Type ◽  
Professional Skepticism ◽  
Company Limited ◽  
A Company ◽  
Practical Implications ◽  
Do So

Purpose To remind sponsors to adopt an attitude of “professional skepticism” in Hong Kong IPOs. Design/methodology/approach Explains the Securities and Futures Commission (“SFC”)'s sanction on BOCOM International (Asia) Limited (“BIAL”) as a sign of determination to hold sponsors to account as gatekeepers to the Hong Kong capital markets. Findings The SFC has reprimanded and fined BIAL HK$15 million for failing to discharge its duties as a sole sponsor in a listing application for China Huinong Capital Group Company Limited (“China Huinong”), a company established in the PRC. This substantial fine reinforces the need for sponsors to ensure that they fully and properly discharge all of their duties, and that they will be held responsible for any failure to do so, even if the listing is not ultimately approved. Practical implications If sponsors fail to fulfil the requirements required under the sponsors’ regulatory regime, the SFC will be proactive and impose tough sanctions, even if the listing application is eventually withdrawn or returned by the SEHK. Originality/value Practical guidance from experienced regulatory, financial and commercial dispute resolution lawyers.

SEC releases enforcement division FY 2017 annual report: shift in tone and likely approach

2018 ◽  
Vol 19 (1) ◽  
pp. 15-19
Author(s):  
Matthew C. Solomon ◽  
Robin M. Bergen ◽  
Alexis Collins
Keyword(s):  
Asset Management ◽  
Design Methodology ◽  
Annual Report ◽  
Risk Profile ◽  
Content Type ◽  
Policies And Procedures ◽  
The Us ◽  
Retail Investors ◽  
Practical Implications ◽  
Insight Into

Purpose To discuss and analyze the US Securities and Exchange Commission’s (SEC’s) FY 2017 Annual Report, which details its priorities for the coming year and evaluates enforcement actions that occurred during FY2017. Design/methodology/approach Summarizes key shifts from FY 2016, outlines the Enforcement Division’s current priorities, and, in view of its stated focus on the conduct of investment professionals and protection of retail investors, provides guidance to the investment management industry as it gears up for the coming year. Findings The Report provides insight into changes in the SEC’s approach to enforcement actions, including a general shift in tone suggesting a more measured approach to enforcement and remedies and a move away from a statistics-oriented approach, and a glimpse into its priorities for the coming year, including five core principles guiding the Division’s enforcement decisions. Practical implications As those in the asset management industry consider revisions to their policies and procedures for FY 2018, as well as their risk profile more generally, they should keep in mind key insights into the Commission’s enforcement strategy offered by the Report. Originality/value Practical guidance from experienced securities enforcement, litigation, compliance and anti-corruption lawyers.

DuPont analysis and dividend policy: empirical evidence from Malaysia

2018 ◽  
Vol 30 (1) ◽  
pp. 52-72
Author(s):  
Samuel Jebaraj Benjamin ◽  
Zulkifflee Bin Mohamed ◽  
M. Srikamaladevi Marathamuthu
Keyword(s):  
Design Methodology ◽  
Dividend Policy ◽  
Explanatory Power ◽  
Return On Assets ◽  
Policy Studies ◽  
Content Type ◽  
Market Participants ◽  
Dupont Analysis ◽  
Asset Turnover ◽  
Practical Implications

Purpose The purpose of this paper is to investigate the informativeness of asset turnover (ATO) and profit margin (PM) of the DuPont analysis in explaining dividend policy. Design/methodology/approach Annual financial data from Compustat for the period 2004-2009 were used to analyze a sample of Malaysian firms. Findings This study finds both PM and ATO to strongly explain contemporaneous dividends. The decomposition of return on net operating assets (RNOA) into PM and ATO also improves the explanatory power of dividends. The results of the predictive model show that PM and ATO are useful in predicting the propensity of firms to pay dividends. The results of the change dividend model, however, do not provide any significant results for PM and ATO. Practical implications Understanding the influence of ATO and PM on dividends could enable managers to realize the importance of these factors when making dividend policy decisions. Other market participants, such as financial analysts and lenders, could also recognize the empirical specifics related to decomposing the profitability measure into its two components, one measuring the asset efficiency and the other measuring the profitability per unit of product, in the context of dividend policy. Originality/value This study extends the empirical specifics of prior dividend policy studies by decomposing the popular profitability measure of return on assets into its two components of PM and ATO.

A “family of cycles” – major and auxiliary business cycles

2014 ◽  
Vol 32 (3) ◽  
pp. 306-323 ◽  
Author(s):  
Arvydas Jadevicius ◽  
Simon Huston
Keyword(s):  
Systematic Review ◽  
Business Cycles ◽  
Design Methodology ◽  
Market Dynamics ◽  
Property Market ◽  
Proper Understanding ◽  
Content Type ◽  
Market Participants ◽  
Practical Implications

Purpose – The paper aims to discuss the major and auxiliary types of cycles found in the literature. Design/methodology/approach – The existence of cycles within economy and its sub-sectors has been studied for a number of years. In the wake of the recent cyclical downturn, interest in cycles has increased. To mitigate future risks, scholars and investors seek new insights for a better understanding of the cyclical phenomenon. The paper presents systematic review of the existing copious cyclical literature. It then discusses general characteristics and the key forces that produce these cycles. Findings – The study finds four major and eight auxiliary cycles. It suggests that each cycle has its own distinct empirical periodicity and theoretical underpinnings. The longer the cycles are the greater controversy which surrounds them. Practical implications – Cycles are monumental to a proper understanding of complex property market dynamics. Their existence implies that economies, whilst not deterministic, have a rhythm. Cyclical awareness can therefore advance property market participants. Originality/value – The paper uncovers four major and eight auxiliary types of cycles and argues their importance.

In or out? – the CFTC explains when virtual currencies come within its jurisdiction

2020 ◽  
Vol 21 (2/3) ◽  
pp. 167-169
Author(s):  
Daniel Nathan ◽  
Nikiforos Mathews
Keyword(s):  
Design Methodology ◽  
Leadership Role ◽  
Commodity Futures ◽  
Futures Trading ◽  
Virtual Currency ◽  
Content Type ◽  
Judicial Decisions ◽  
History Of ◽  
The U.S

Purpose To summarize and explain the U.S. Commodity Futures Trading Commission’s (CFTC’s) guidance regarding whether cryptocurrency is subject to CFTC jurisdiction. Design/methodology/approach The article reviews the CFTC’s March 24, 2020 final interpretive guidance, summarizes the history of the agency’s jurisdiction over leveraged, margined or financed retail transactions, and relates it to the CFTC’s guidance and judicial decisions regarding cryptocurrency. Findings We found that the CFTC, in carrying out its leadership role related to developments in the fintech industry, had provided clarity about its jurisdiction over cryptocurrency. The CFTC defines virtual currency as a “commodity,” even if intangible, and finds that many transactions in virtual currency satisfy the exception to the CFTC’s jurisdiction over leveraged retail commodity transactions because “delivery” can be said to occur within 28 days. Originality/value The article provides a useful summary of an important pronouncement from the CFTC in a manner that is readily understandable and relatable to industry participants and legal practitioners in this field.

MSRB publishes its first compliance advisory for broker-dealers

2016 ◽  
Vol 17 (3) ◽  
pp. 49-51
Author(s):  
Scott R. Anderson ◽  
Kate S. Poorbaugh
Keyword(s):  
Financial Services ◽  
Design Methodology ◽  
Content Type ◽  
Compliance Programs ◽  
Policies And Procedures ◽  
Practical Guidance ◽  
Effective Compliance ◽  
Practical Implications

Purpose To summarize the Municipal Securities Rulemaking Board’s 2016 Compliance Advisory for brokers, dealers and municipal securities dealers. Design/methodology/approach Summarizes several Municipal Securities Rulemaking Board (MSRB) rules that the Compliance Advisory highlights as presenting key compliance risks for brokers, dealers and municipal securities dealers. Discusses the factors included in the Compliance Advisory that dealers should consider when evaluating compliance procedures and controls. Findings By highlighting some key compliance risks and providing considerations tailored to those risks, the Compliance Advisory can be used as a tool to aid dealers in developing and assessing effective compliance programs. Practical implications Dealers should consider reviewing their firms’ existing compliance policies and procedures in light of the considerations discussed in the Compliance Advisory. Originality/value Practical guidance from experienced securities and financial services regulatory lawyers.

Financial institutions and the new class action under Italian law: a compliance approach

2019 ◽  
Vol 20 (4) ◽  
pp. 9-14
Author(s):  
Francesco Falco
Keyword(s):  
Financial Institutions ◽  
Design Methodology ◽  
Case Law ◽  
Class Action ◽  
Content Type ◽  
New Class ◽  
Italian Law ◽  
Policies And Procedures ◽  
Practical Guidance ◽  
Practical Implications

Purpose To explain the impacts of the class action, as recently amended by the Italian Parliament, and help financial institutions to develop a compliance approach in order to avoid and/or mitigate the relevant risks. Design/methodology/approach This article provides an overview on the Italian class action, as recently amended by the Italian Law No. 31/2019, examines the relevant impact for financial institutions (taking into account some recent case law) and identifies possible compliance solutions to avoid/mitigate the relevant risks. Findings The recent amendments to the Italian class action may increase risks for financial institutions. Practical implications (Optional) Financial institutions should examine their relationships with stakeholders in the light of the new Italian class action in order to implement policies and procedures to prevent the relevant risks. Originality/value Practical guidance from an experienced lawyer in the litigation and compliance fields.

OCIE to investment advisers: focus on these five problem areas

2017 ◽  
Vol 18 (2) ◽  
pp. 16-18
Author(s):  
Brynn D. Peltz ◽  
Ilan S. Nissan ◽  
Evyn W. Rabinowitz
Keyword(s):  
Design Methodology ◽  
Code Of Ethics ◽  
Securities And Exchange Commission ◽  
Content Type ◽  
Policies And Procedures ◽  
Funds Management ◽  
Practical Guidance ◽  
Investment Advisers ◽  
Practical Implications

Purpose To explain a Risk Alert published on February 7, 2017 published by the Securities and Exchange Commission (SEC) Office of Compliance Inspections and Examinations (OCIE) describing the five compliance topics most frequently identified in deficiency letters sent to investment advisers after the completion of an OCIE examination. Design/methodology/approach Discusses deficiencies noted by the OCIE relating to the Compliance Rule, required regulatory filings, the Custody Rule, the Code of Ethics Rule, and the Books and Records Rule. Findings The OCIE published the Risk Alert with its noted deficiencies only one month after releasing its exam priorities for the year. Practical implications All investment advisers should consider reviewing their compliance practices, policies and procedures in light of the deficiencies and weaknesses identified in the SEC Risk Alert. Originality/value Practical guidance from experienced lawyers specializing in asset and funds management.

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