Knight Capital’s filings reveal scant oversight focus on tech risks for board
By Emmanuel Olaoye
WASHINGTON, Aug. 3 (Thomson Reuters Accelus) – Knight Capital Group’s public filings show that the company viewed technology systems among significant risks faced by the firm, but the duties outlined for its seven board members do not specify oversight of technology as a factor that could derail it, a threat the company now faces.
A $440 million trading foul-up blamed on software, which comes after problems with Facebook’s initial public offering and the Flash Crash of 2010, has put a renewed focus on the level of risk posed by technology.
INTERVIEW: Whistleblowing is a duty if internal calls unheeded, U.S. bailout overseer tells compliance officers
By Stuart Gittleman
NEW YORK, July 31 (Thomson Reuters Accelus) - Compliance officers have a duty to become whistleblowers if their concerns are not heeded internally, Neil Barofsky, the watchdog over the U.S. financial crisis bailout program, told Compliance Complete in an interview.
Exposing wrongdoing is the only way to eradicate a “cancer” of fraud that can endanger companies and the larger economy, said Barfosky, who also in the interview warned on dangers of a revolving door between financial regulators and Wall Street.
Barofsky was appointed Special Inspector General for the Troubled Asset Relief Program in the aftermath of the September 2008 financial crash by President George W. Bush and served from mid-December through March 2011, when he left to teach at New York University School of Law.
As SIGTARP, Barofsky and his colleagues were tasked with reporting on whether the relief program, or TARP, was using funds as Congress intended, and with preventing the misuse or theft of trillions of dollars of public funds.
Before coming to Washington D.C., Barofsky was a Manhattan federal prosecutor whose work resulted in the convictions of Columbian drug dealers, the men behind the Refco scam initial public offering, and mortgage fraudsters who preyed on homeowners who were desperately seeking to avoid foreclosure.
Barofsky wrote a just-published book, Bailout: an inside account of how Washington abandoned Main Street while rescuing Wall Street. He took time from appearing on talk shows, where he is being asked about working with Treasury Secretary Timothy Geithner, to discuss how financial service compliance officers can use what he learned in the crucible of governing during a financial crisis to protect their firms and customers – and themselves.
Collateral management reform could herald benefits for risk managers
By Rachel Wolcott
LONDON/NEW YORK, July 30 (Thomson Reuters Accelus) - Risk managers could benefit from the financial services industry’s revamp of collateral management services in preparation for the new regulatory requirements that will drive demand for high-quality collateral. New regulations for the clearing of over-the-counter (OTC) derivatives through central counterparties (CCPs) alone could increase demand for high-quality collateral to $2 trillion or more, according to some estimates. In response, some firms are aiming for a more universal approach to collateral management.
Many firms still take a rather old-fashioned view of collateral management. It is often fragmented and inefficient. Most firms operate collateral management in silos determined by geography or asset class. This can lead to poor communication between different collateral management functions — for example, repo staff might not speak to the securities lending unit, or the New York office might not speak to its UK counterpart as much or as often as it should. (more…)
Pressures of high revenues, growth, fuel compliance shortcuts, study finds
By Julie DiMauro and Stuart Gittleman
NEW YORK, July 26 (Thomson Reuters Accelus) – Most Fortune 500 companies have the components of a comprehensive compliance program, but many have too many employees who feel pressured to compromise standards, a recent nationwide survey revealed. Pressures intensify in periods of growth and high profits, the survey’s sponsor said. The National Business Ethics Survey (NBES) study, for the nonpartisan research group Ethics Resource Center (ERC), polled adult employees in a wide range of job titles working at least 20 hours per week for U.S.-based for-profit companies with yearly revenues of $5 billion or more.
ABA urges U.S. consumer bureau to exercise caution in regulating prepaid debit cards
By Emmanuel Olaoye
WASHINGTON/NEW YORK, July 26 (Thomson Reuters Accelus) - The Consumer Financial Protection Bureau should expand the disclosure protections on debit and credit cards to general purpose reloadable prepaid cards, but it should provide flexibility on the disclosures that prepaid card issuers have to make to consumers, a major U.S. banking trade group said on Tuesday.
In a comment letter submitted yesterday, the American Bankers Association said that the general purpose reloadable, or GPR, prepaid cards should be given the same protections as prepaid cards such as gift cards, but the CFPB should recognize that there are a variety of GPR cards and that the market will continue to evolve. (more…)
With new U.S. swaps definitions, the horse is finally put before the cart
By Bora Yagiz
NEW YORK, July 24 (Thomson Reuters Accelus) - The definition of swaps finalized by the U.S. futures regulator is the linchpin in an overhaul that will change the swaps market landscape markedly and offer the promise of lower risk.
In an effort to bring the over-the-counter (OTC) swaps into the regulatory fold for the first time since they appeared in 1981, the Commodity Futures Trading Commission (CFTC) issued a set of final rules this month defining a “swap” under the Dodd-Frank Act, section 721. These rules complement the agency’s other final rule on end-user exemptions as well as those adopted by the Securities and Exchange Commission on “security-based swaps” and “security-based swaps agreements.” They also delineate the jurisdiction for mixed swaps between the agencies. (more…)
Compliance lessons: U.S. Senate report on HSBC AML failings
By Susannah Hammond
LONDON/NEW YORK, July 20 (Thomson Reuters Accelus) - The United States Senate Permanent Sub-Committee on Investigations has published a report into U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing using HSBC Group plc as a case history. The report does not detail enforcement action taken, though there are several likely fines being considered by a number of U.S. authorities regarding HSBC’s anti-money laundering (AML) failings; it is however a valuable insight into the operations and associated compliance, risk and AML issues arising in a global financial services firm. (more…)
Low interest rates can pose safety-and-soundness issues, state bank regulator says
By Ted Knutson
WASHINGTON, July 19 (Thomson Reuters Accelus) - The low interest rate environment being pushed by the Federal Reserve can pose safety and soundness issues for some banks, Michael Stevens, senior executive vice president of the Conference of State Bank Supervisors, told Thomson Reuters Accelus Wednesday.
“Low interest rates are a supervisory concern because they can have a corrosive effect on net interest margins, which impacts profitability, which impacts capital formation, which affects the ability to lend more and to grow,” said Stevens. (more…)
U.S. bank regulator promises better enforcement following scathing congressional report into HSBC AML failures
By Brett Wolf
WASHINGTON, July 18 (Thomson Reuters Accelus) - After widespread anti-money laundering (AML) failures at HSBC that continued for years due to lax regulatory oversight, a U.S. bank regulator has vowed to take a broader view of institutions’ compliance programs during examinations.
“The agency was much too slow in responding and addressing what are significant weaknesses or violations at this institution. Going forward, I would hope that we would be much more nimble and take into account the entire picture,” Thomas Curry, who took over as Comptroller of the Currency less than four months ago, said on Tuesday during a hearing by the Senate Permanent Subcommittee on Investigations. (more…)
Congress frequently issues scathing reports and scathing reprimands, engaging in heated questioning and fiery exchanges.
It’s just Congress’s way of opening an escape route for people who should be severely punished, except for the fact the certain people in high places don’t really want to go quite that far. It’a a pathetic substitute for actual consequences and genuine justice that makes it appear to the public that Congress is doing something substantive in response to a particular wrongdoing.
That dearth of real justice is precisely why there is so much wrongdoing in corporate America and so little real representation on behalf of American citizens in DC.
Futures customer protections improved in U.S. and overseas after frauds
By Nick Paraskeva
NEW YORK, July 17 (Thomson Reuters Accelus) - The CFTC approved tough customer protection rules for futures firms’ days after the Peregrine default led to over $200 million in missing client funds. Losses arising from a fraud by the owner of the futures broker come soon after a $1.6 billion hole in client funds from the collapse of MF Global. The new rules require daily calculations of client money to be reported, and for senior management to certify cash movements.
The CFTC charged Peregrine Financial Group, and its owner Russell Wasendorf, Sr, of misappropriating customer funds. A recent audit of Peregrine by the National Futures Association (NFA), the self-regulator for independent futures firms, found the firm falsely represented it held $220 million customer funds at a bank account, which only had $5.1million. The firm filed for liquidation Friday, and its owner was arrested. (more…)
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