Compliancex

CFPB to Oversee Credit Bureaus

The Consumer Financial Protection Bureau announced that it will begin supervising the leading credit bureaus (credit bureaus join mortgage brokers, payday lenders and credit card companies among the non-banking firms the bureau regulates).

The bureau will oversee about 30 credit reporting companies, including the “big three” – Equifax, Experian and TransUnion, as well as other similar outfits with more than $7 million in annual revenue.

Of course, the credit reporting companies already must abide by the Fair Credit Reporting Act, are subject to Congressional oversight, and the FTC has been the primary enforcer of FCRA for about 40 years now. And this begs the question as to whether a better consumer finance mousetrap was really necessary.

Short Selling Brothers Settle SEC Charges for $14.5 Million

The Securities and Exchange Commission announced that two options traders charged earlier this year with short selling violations have agreed to pay more than $14.5 million to settle the case against them.

The pair of brothers, Jeffrey and Robert Wolfson, were busted for engaging in “naked short selling.” The duo failed to locate shares involved in short sales and could not close the sales by delivering. The bogus shorts were conducted through an account at a New York-based dealer, Golden Anchor Trading II, which was also named in the SEC suit.

SEC rules require short sellers to locate shares to borrow before selling them short, and they must purchase securities to close out their failures to deliver by a specified date.

The Brothers Wolfson made approximately $9.5 million in illegal profits from their naked plays. They settled the SEC’s administrative proceedings without admitting or denying the findings, and have been censured along with Golden Anchor.

CFTC Orders LMC Asset Management, Inc. to Pay for Forex Registration Violations

The Commodity Futures Trading Commission issued an order settling charges that LMC Asset Management, Inc. (LMC) of Deerfield Beach, Fla., exercised “discretionary trading authority” over customers’ foreign currency (forex) transactions, without being registered as a Commodity Trading Advisor (CTA).

During a two year period from October 2010 through October 2011, the outfit “exercised discretionary trading authority” over accounts that were not so-called “eligible contract participants (ECPs).”

The CFTC order requires LMC to pay a $140,000 civil monetary penalty and to cease and desist from further violations the Commodity Exchange Act and CFTC regulations. The order also prohibits LMC from entering into any commodity-related transactions.

National Futures Association Acts To Protect Futures Customers

The National Futures Association (NFA) announced additional initiatives to strengthen safeguards for customer segregated funds.

A special committee of representatives from the futures industry’s self-regulatory organization (SRO) has proposed additional requirements to SRO rules and regulatory practices.

The rules are aimed at strengthening safeguards for customer segregated and secured funds held at the firm. The initiative has been joined by other industry SROs including the CME Group, InterContinental Exchange, Kansas City Board of Trade and the Minneapolis Grain Exchange.

The SRO Committee unanimously agreed to immediately begin the process of confirming the balances of customer segregated bank accounts for all FCMs using a web-based electronic confirmation process.

FSA Changes Coming Soon

Changes to the regulation of the financial services sector in the UK have been in the works that include separating the regulation of “prudential and conduct operations” by two new organizations: the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).

Essentially the Financial Services Authority is being split into two new entities.

The main change will be in the way that firms are supervised and in the risk mitigation process. Firms that are dual regulated such as banks, insurers and major investment firms, will be supervised by two independent groups for prudential and conduct.

These groups will work to different objectives and act separately with firms, but will coordinate internally to share information and data, says the FSA. All other firms will be supervised by one supervision area for both conduct and prudential issues.

The new regulatory regime is slated to be in place by 2013.

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Kyle Colona is a New York-based freelance writer and a Feature Writer for CompliancEX and the Wall Street Job Report. He has an extensive background in legal and regulatory affairs in the financial services sector and his work has appeared in a variety of print and on-line publications. You can find him on linkedin.