by Kyle Colona on March 30, 2012
Let’s go spanning the world for a quick glance at today’s breaking regulatory news.
From the SEC Desk
1. Hedge Fund Registry
Tucked into the Dodd-Frank reform measure, today is the deadline for Hedge Fund advisers to register with the SEC. This will push hundreds of private advisers at hedge funds and private equity firms under the SEC’s regulatory umbrella. Of course, this begs the question of whether or not the securities watchdog has the resources to manage this work flow and the tools to examine these advisers.
In fact, some analysts contend that the agency has not hired the new staff to focus on reviewing the registration applications. According to Bloomberg News Cornelius Huxley, a director at Boston University’s Morin Center for Banking and Private Law, the influx of applications “reflects gaps in the SEC’s knowledge of the sector.” [CompliancEX]
2. Credit Suisse ETN under Review
The SEC announced that a Credit Suisse Group exchange traded note (or ETN) is under review. The “Velocity Shares Daily Short Term ETN” apparently became “unhinged” from its benchmark that saw a 90% spike above its actual asset value once the Zurich-based firm closed the fund in February.
The enforcement division review is part of the enhanced regulatory scrutiny that began 2011 in these hybrid exchange traded funds. Such investments were once relatively easy and safe ways for fund investors, 401K holders and other pension holders to diversify their investments. But these new vehicles are more risky since they are coupled with a future’s play. [CompliancEX]
3. Will Volcker Rule Fuel Costs?
According to a report paid for by Morgan Stanley (a key player in the oil futures and derivatives game), the Volcker rules will raise US electricity costs while cutting the nation’s oil and natural gas output. The report contends that “investment in natural gas production would fall by $7.5 billion a year as companies, unable to manage their price risks, curtail spending on exploration,” according to Bloomberg News.
At the same time, there is a growing narrative that oil and natural gas should be removed from the commodities trading game. In fact, CFTC commissioner was blistered by CNBC’s Rick Santelli in a broadcast on March 29th for the agency’s apparent inability to rein in futures and hedge fund plays. [CompliancEX]
From European Union
4. EU to Cap Rescue Lending at 800 Billion Euros
As the sovereign debt crisis continues to plague the European Union, Austria’s Finance Minister confirmed that EU members have a tentative agreement to cap overall rescue lending at 800 billion euros (or $1.1 trillion). According to BusinessWeek, this figure is said to include about 300 billion in loans that have already been committed as well as another 500 billion in the so-called “permanent rescue fund.”
5. EU to Ban Proposed Securities
Regulators in the EU are pushing to ban some new financial instruments before they are sold. The precautionary measures are said to be part of an overhaul of the trading zones’ market rules under “Mifid” with an eye on “investor protection.”
6. SIFI Wind Down Plan on the Way
While the US has its banks that are known as “too big to fail,” the EU goes with the label “SIFI,” or systemically important financial institutions. While having a plan to wind down big banks in the US is part of the Dodd-Frank reform measure that the Federal Reserve is working on in conjunction with the FDIC, the EU is finalizing a similar plan for so-called SIFIs in the EU. The plans are said to include writing down a failing lender’s creditors and shareholders.
From the UK
7. Investment Banks to Face FSA Enforcement on Bribery Rules
The U.K. finance regulator contends that up to half of the investment banks it recently examined did not adequately assess the risk of employees paying bribes and ignored the agency’s anti-corruption rules. The firms are said to include eight global investment banks and seven smaller firms examined by the FSA since the summer of 2011.
According to the Bloomberg News report, the FSA contends that these firms had “significant work to do” while not naming the name the firms. In sum, the agency is considering whether to require investment banks to improve their bribery systems in accordance with a new bribery law that became effective in July 2011.