Investment Advisers Trip Up On Social Media, Global Regulators Plan Margin Rules For Uncleared Derivatives, Dewey Hopes For A Speedy Bankruptcy: CompliancEX News 5/30/2012
by The Compliance Exchange on May 30, 2012
Advisers Still Shaky On Social Media Policy [Reuters] As the securities industry finally warms up to using social media sites such as Facebook and LinkedIn, regulators are discovering that brokerages and investment advisers are off to a rocky start. Some firms are making major missteps as they ramp up their presence on the sites, and many do not even have social networking policies. Or if they do, many have inadequate guidelines. And while many brokerages and investment advisers were once reluctant to use social media for their work, a growing number find they cannot ignore the marketing opportunity.
Anger Over Christine Lagarde’s Tax-Free Salary [Independent.co] It was called her “Let them eat cake” moment. Now Greece will be saying: “Make her pay tax”. The IMF chief Christine Lagarde was accused of hypocrisy yesterday after it emerged that she pays no income tax – just days after blaming the Greeks for causing their financial peril by dodging their own bills. The managing director of the International Monetary Fund is paid a salary of $467,940 (£298,675), automatically increased every year according to inflation. On top of that she receives an allowance of $83,760 – payable without “justification” – and additional expenses for entertainment, making her total package worth more than the amount received by US President Barack Obama according to reports last night.
Factbox: Facebook IPO And Legal Arguments Ahead [Reuters] Facebook’s initial public offering has sparked lawsuits and investigations after a botched trading debut on the Nasdaq stock market delayed the completion of many orders and questions arose about selective disclosures of the company’s financial prospects. Facebook’s shares closed on Monday at $28.84, leaving investors who bought at the $38 IPO price with losses of 24.1 percent. U.S. law and regulations on IPOs and disclosure are complex and harbor many gray areas. Following are some of the laws and rules that may play a role in the outcome of this increasingly tangled affair.
Merrill Misstep May Hurt Battle vs Broker Claims [Reuters] Merrill Lynch’s battle to void a $10 million arbitration ruling suffered a setback this week after a new court filing raised questions about its claims that a panel member had not disclosed her potential conflicts. The brokerage giant, which Bank of America agreed to acquire in 2008, is challenging an April 3 arbitration ruling that awarded two brokers, Tamara Smolchek and Meri Ramazio, more than $10 million in damages stemming from unpaid compensation claims. But now, one of its key arguments in a high profile case that could affect hundreds of ex-Merrill brokers – that the arbitration panel’s chairwoman was biased – may fail because of the firm’s own revelations.
Dewey Hopes to Resolve Bankruptcy Quickly [DealBook] As Dewey & LeBoeuf began its bankruptcy proceedings on Tuesday, its advisers said their aim was to speed the failed law firm through Chapter 11. Among the chief near-term goals of Dewey advisers is reaching an agreement to recover money from some of the firm’s former partners, many of whom departed earlier this year amid fear about their employer’s financial health. That exodus drained Dewey of revenue and the confidence that the firm would survive.
FINRA Hits Back in Battle Over Advisor SRO [Advisorone] The battle over whether there should be a self-regulatory organization (SRO) for advisors continues. FINRA is now refuting a review that investment advisory trade groups had the Boston Consulting Group (BCG) conduct that challenged FINRA’s cost estimates in assuming the role of an SRO for advisors. The review, which was released May 10 and conducted by BCG on behalf of the Certified Financial Planner Board of Standards (CFP Board), Financial Planning Association (FPA), Investment Adviser Association (IAA), National Association of Personal Financial Advisors (NAPFA) and TD Ameritrade Institutional (TDAI), said that FINRA’s one-and-a-half page estimate released April 25 underestimated overhead costs and overestimated investment advisor examiner productivity.
Offshore U.S. Oversight of Derivatives May Bolster Defenses Against JPMorgan-Type Losses [Reuters] U.S. regulators are looking to use new their oversight authority over foreign derivatives trades to reduce the chances of new shocks such as JPMorgan Chase & Co’s trading loss of at least $2 billion. Pointing out that JPMorgan’s money-losing trades on a credit default swap index were conducted in a London unit, similar to recent failures at AIG and Lehman Brothers, Commodity Futures Trading Commission Chairman Gary Gensler said implementation of Dodd-Frank regulatory reform rules would improve supervision of such activity in the future by expanding cross-border oversight.Gensler and Securities and Exchange Commission Chairman Mary Schapiro said their agencies would soon issue guidance on cross-border application of Dodd-Frank swaps rules, and Gensler urged lawmakers not to roll back Dodd-Frank derivatives requirements for affiliates of U.S. based companies.
CFTC Probing 2011 Cotton Market Ructions: FT [Reuters] The Commodity Futures Trading Commission has opened an investigation into the volatile trading and large contract deliveries that roiled the cotton market a year ago, the Financial Times reported on Wednesday. The CFTC’s enforcement division has interviewed traders about the large volume of cotton bales that were delivered against the Intercontinental Exchange’s benchmark U.S. futures contract last summer, the newspaper reported, citing industry executives and companies contacted by the CFTC.
Greek Exit From Euro Seen Exposing Deposit-Guaranty Flaws [Bloomberg] The threat of Greece exiting the euro is exposing flaws in how banks and governments protect European depositors’ cash in the event of a run. National deposit-insurance programs, strengthened by the European Union in 2009 to guarantee at least 100,000 euros ($125,000), leave savers at risk of losses if a country leaves the euro and its currency is redenominated. The funds in some nations also have been depleted after they were used to help bail out struggling lenders, leading policy makers to consider implementing an EU-wide protection plan.
Global Regulators Plan Margin Rules Soon For Uncleared Derivatives [Reuters] Global regulators said on Wednesday they will issue proposals in coming weeks on rules to encourage banks to put derivative trades through a central clearing house, but they won’t be ready for the G20 summit in June. The move is part of a huge regulatory overhaul aimed at cutting risk in the $700 trillion derivatives industry. A disorderly unraveling of derivative trades contributed to the global credit crunch in 2008 and 2009.
Buy-Side Demands More From CCPs Ahead of European Swaps Rules [TheTradeNews] Uncertainty over how clearers will handle issues related to segregation and insolvency are hampering preparation for new OTC derivatives rules, UK-based buy-side trade body the Investment Management Association (IMA) has warned. Speaking to theTRADEnews.com, Jane Lowe, director of markets at the IMA, whose members hold a total of £3.9 trillion assets under management, said institutional investment clients of clearing members were lacking crucial information on segregation arrangements.