As President Obama said, the stock market needs to be under a watchful eye

President Obama made this statement in his inaugural address.  For the latest on what’s happening read below.  SmartStops is proud to be a member of the GlobalRisk Community.    Of course , we at SmartStops think regulation can only achieve so much, and hope that our intelligent risk management approach can be an alternative “watchful eye” helping increase protection for all investors, traders and professional advisors.

This was originally published on the GlobalRisk Community website.

 DFA Reform: With 30% of rules in place will regulators be ready to prevent another financial crisis.

Report by Marijana Curguz – GlobalRisk community’s participant at the conference

With House Committee passing a slew of rules on May 4, 2011 to postpone the implementation of derivatives section of the DFA by 18 months, Seila Bair’s decision to leave the FDIC on July 8, Geithner’s warning of a financial crisis if the legal debt limit is not raised, many are wondering if the U.S. economy is heading back into recession and will regulators be ready to prevent it.
These and other concerns were the main focus of the Regulatory Risk conference held in New York on May 9-10, 2011.  The organizer, Marcus Evans, brought together leading industry Experts and a keynote speaker Carlo V. di Florio, Head of SEC Office of Compliance Inspections and Examination,  to evaluate critical Regulatory Reforms: the Dodd-Frank Act, Basel III, housing finance reforms and KYC/CIP that are drastically altering the landscape of the financial world as we know it.
Florio underlined SEC need for a big budget boost to keep up with the fast-growing markets and carry out new duties they were tasked by the DFA.  SEC was handed lion’s share of work to implement DFA that requires it to write nearly 100 new rules for Wall Street by summer, manage systemic risk, oversee the $600 trillion derivatives market, regulate the unregulated (PE, HF, Credit Rating Agencies, ABS) and catch the next Bernard Madoff, and secure greater transparency and liquidity.
Regulators confirmed they asked the Congress to extend the deadline for some portions of their rulemaking as only 30% of the regulations have been enacted while 62% of 387 rules have not been proposed yet. As of April 2011, none of the deadlines of 30 DFA rule makings were met. On May 4, 2011, House Committee approved a bill to delay by 18 months or until December 31, 2012 the derivatives section of DFA. It kept the July 21, deadline for reporting of swap trades and for regulators to define who is covered by the law. The largest 25 bank holding companies currently have $277 trillion notional amount of swaps. 
Florio said SEC is finalizing the rules on the new risk-based national exam program, consolidated audit trail and large trader reporting, that will help it better track trading across the fragmented U.S. equity markets. Some of the key risks the Exam is focusing on, broken down by participants, are: Investment Managers (valuation, portfolio management, performance), Broker Dealers (product innovation, abusive sales practices, lack of technology/system breaks), Credit Rating Agencies (conflict of interests, inadequate processes, people).
The panel of industry experts including Mark Gunton, CRO, HSBC, Scott Polakoff, Principal, Booz Allen, to name a few, shared their experiences and view on how to navigate the regulatory landscape to create an effective compliance plan, determine what compliance areas are most important for growth and managing regulatory compliance risk, evaluate the people, processes and technology necessary to facilitate compliance with new regulations, optimize compliance and risk management practices by discussing key issues: new capital and liquidity requirements, enhance transparency across the business.
The conference ended on a positive note, with participants believing the financial industry is heading for further consolidation though the worst might be over as some indicators purport it: Loss projections for FI are budgeted at  $4.5  Bn down from $23 bn, a year ago, deposit insrance is profitable again, Banks downgrades declined, Banks failure cost decreased to $92bn from $170bn y-o-y, there is more transparency in the markets, Whistleblowers regulation is in place, trading and markets, in particular swap deals have improved significantly.

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About SmartStops

We are a new service launched to the market in July of 2008. Our mission - to help ensure stock and etf investors stay protected in their positions at all times. see www.smartstops.net

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